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Discussion
Generally, a cash method taxpayer reports income in the year
of receipt. Sec. 451(a). However, under section 451(d) an
exception is provided for farmers if they normally report income
from the sale of crops in a year following crop production.
Under the section 451(d) exception, a cash method farmer who
normally reports income from the sale of his crops in the year
following crop production may elect to defer treating as income
crop insurance proceeds received in a year until a following
year. Section 451(d) provides as follows:
SEC. 451. GENERAL RULE FOR TAXABLE YEAR OF INCLUSION.
(d) Special Rule for Crop Insurance Proceeds or
Disaster Payments.--In the case of insurance proceeds
received as a result of destruction or damage to crops, a
taxpayer reporting on the cash receipts and disbursements
method of accounting may elect to include such proceeds in
income for the taxable year following the taxable year of
destruction or damage, if he establishes that, under his
practice, income from such crops would have been reported in
a following taxable year. * * * An election under this
subsection for any taxable year shall be made at such time
and in such manner as the Secretary prescribes.
Although the above statute does not expressly provide that
under the farmer’s normal tax reporting for crop income “all” (or
some particular percentage) of a farmer’s crop income must be
deferred to a following year in order to qualify for the section
451(d) 1-year deferral of crop insurance proceeds received, the
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Last modified: March 27, 2008