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a Schedule J, Farm Income Averaging, for computation of the tax.
The 3 base years in the averaging computation were 1995, 1996,
and 1997. Two of these years, 1995 and 1996, were years in which
petitioners sustained NOLs. The NOLs for 1995 and 1996 had been
carried back to prior years, and both NOLs were fully absorbed by
the taxable income of such prior years. The NOL for 1995 had
been carried back to 1992, and the unabsorbed portion of that NOL
was carried forward to 1993, where the remainder of the 1995 NOL
was fully absorbed. The 1996 NOL had been carried back to 1993
and was fully absorbed by the net income for 1993. With respect
to the 1995 carryback, petitioners received income tax refunds of
$23,163 and $3,086, respectively, of their 1992 and 1993 taxes.
With respect to the 1996 carryback, petitioners received a refund
of $17,510 of their 1993 taxes. Thus, the three refunds from
these carrybacks totaled $43,759.
Petitioners reported taxable income of $476,055 for the year
1998 and taxable income of $414,742 for 1999. Appropriate
elections were made to calculate the tax for both years under the
income-averaging provisions of section 1301. To that end, each
return included a Schedule J.5 For the 1998 tax year, the
5 The income-averaging provisions of sec. 1301 apply to
"elected farm income" that is defined generally under sec.
1301(b)(1)(A) as that portion of taxable income for the taxable
year that is attributable to any farming business and that is
specified by the taxpayer as elected farm income. For the year
(continued...)
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