Estate of Clifford C. Haugen - Page 12

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          1995 and 1996.  Respondent acknowledges that the reporting                  
          instructions (requiring negative income amounts of base years to            
          be listed as zero) were based on temporary regulations for                  
          section 1301 then in effect.  Respondent agrees, however, that,             
          when the temporary regulations for section 1301 were made final,            
          the final regulations differed from the temporary regulations               
          with respect to negative income of base years in income                     
          averaging.  Under the final regulations, taxpayers may list on              
          Schedule J of their returns negative income realized in the base            
          years for the averaging computation.                                        
               Respondent acknowledges that the 2000 IRS instructions for             
          Schedule J, pursuant to the final section 1301 regulations,                 
          state:                                                                      

               If you had taxable income from farming in 1998 or 1999 and             
               your deductions exceeded your gross income for any of the 3            
               years preceding those years (base years), your taxable                 
               income for averaging purposes for a base year may be a                 
               negative amount.  You can use that negative amount instead             
               of limiting that amount to zero when figuring your tax using           
               Schedule J for 1998 or 1999.                                           

          To accommodate taxpayers who filed 1998 and 1999 tax returns and            
          elected income averaging that included base years with negative             
          taxable income and such income was listed as zero on Schedule J             
          of those returns, the year 2000 instructions recommended that               
          such taxpayers file amended returns for 1998 or 1999 with                   
          Schedules J that would list the negative income of such base                





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