I figured out towards the end that they elected to be taxed as a partnership.  You start out with, "The farm has been incorporated as a 2-person LLC," which is something like saying the baby was baptized into the Jewish faith.  And you have already filed the Form 1065?  As I have pointed out elsewhere, this is the kind of stuff that hits the fan when you believe that LLC's are the solution to every problem.  Did they ask you before they set this up?  If not, suggest they go back to the lawyer for written advice on tax questions.  

IRS would do you a favor with an audit characterizing much of these as sham transactions.