Farm Income Tax Manual

Farm Income Tax Manual

Farm Business Income Averaging, Qualified Intermediary Failure, Death and CCC Loans...

  • Eligible Taxpayers. For income averaging purposes, "electable farm income" includes items of income, deductions, gain and loss attributable to the farming business. Gain or loss from the sale and other dispositions of property that was regularly used in the individual's farming business for a substantial period of time is treated as attributable to a farming business. For this purpose, the term "property" does not include land but does include fixtures affixed to the land. For further discussion, see Farm Income Tax Manual -- § 1.11[1][b] on the LexisNexis® Tax Center.  These insights are also available in print at the LexisNexis® Store.
  • What if a Qualified Intermediary Fails? Rev. Proc. 2010-14 makes it clear that IRS and the Department of the Treasury believe that a taxpayer who, in good faith, sought to complete an exchange but could not do so because of default by the qualified intermediary, should not be required to recognize the gain from the failed exchange until payments are received attributable to the relinquished property. The relief is in the form of requirements imposed by Rev. Proc. 2010-14 . The requirements mirror, to a considerable degree the rules applicable to installment sales. For further discussion, see Farm Income Tax Manual -- § 2.07[8][e][iii][B] on the LexisNexis® Tax Center. These insights are also available in print at the LexisNexis® Store.
  • Implications of Death of a Farmer for CCC Loan Purposes. If a decedent dies during a year when the election is in effect to treat Commodity Credit Corporation loans as income, the outcome would likely be that the commodity subject to the election would be deemed as an item of income in respect of decedent, at least up to the amount of the CCC loan because the election might be considered a pre-death "sale" of the commodity. Assets sold before death are generally considered subject to IRD treatment with the sale completed by the personal representative of the decedent unless there are "substantive" acts yet to be performed at death. In most instances, this outcome would be decidedly less favorable for the estate than a new income tax basis at death. For further discussion, see Farm Income Tax Manual -- § 2.09[4][b][iv][B] on the LexisNexis® Tax Center.  These insights are also available in print at the LexisNexis® Store.