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March 1998. In the amended returns, Waterfall Farms eliminated
the deduction for food for employees. As a result, the
corporation reported taxable income of $7,021 for 1995 and $6,163
for 1996.
2. The Hubers
The Hubers timely filed their joint income tax returns for
1995, 1996, and 1997. On these returns, the Hubers reported Mr.
Huber’s wages from Waterfall Farms. They reported farming income
(including Mr. Huber’s share of the proceeds from the sale of
crops grown on the Huber farm) as self-employment income. They
did not report any income attributable to their food, lodging-
related, and medical expenses paid by Waterfall Farms.
The Hubers filed a Form 1040X, Amended U.S. Individual Income
Tax Return, for 1995. On the amended return, the Hubers elected
to defer crop insurance proceeds. The amended return did not
include the $4,290 paid by Waterfall Farms for the Hubers’ food
in 1995. The Hubers did not amend their 1996 return to include
the $4,395 paid by Waterfall Farms for their food in 1996.
On Schedule F, Profit or Loss from Farming, Mr. Huber
reported gross income, total expenses, and net profit or loss
from his separate farming activities for 1995, 1996, and 1997 as
follows:
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Last modified: May 25, 2011