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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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