Farm Income Averaging If you are engaged in a farming business, you may be able toaverage your elected farm income (EFI) by shifting it tothe 3 prior years (base years). The term "farming business" isdefined in the instructions for Schedule J (Form 1040), FarmIncome Averaging. Who can use farm income averaging?Leipzig luxury hotelsYou can elect to use farm income averaging if, in the year of theelection, you are engaged in a farming business as an individual, apartner in a partnership, or a shareholder in an S corporation. You donot have to have been engaged in a farming business in any base year. Corporations, partnerships, S corporations, estates, and trustscannot use farm income averaging. Elected Farm Income (EFI) EFI is the amount of income from your farming business that youelect to shift to the base years. You can designate as EFI any type ofincome attributable to your farming business. However, your EFI maynot exceed your taxable income, and any EFI from a net capital gainattributable to your farming business may not exceed your total netcapital gain. Income from your farming business is the sum of any farmincome or gain minus any farm deductions or losses that are allowed asdeductions in computing your taxable income. However, it does notinclude gain from the sale or other disposition of land. Gains from the sale or other disposition of farm property.Gains from the sale or other disposition of farm property, otherthan land, can be designated as EFI if you (or your partnership or Scorporation) use the property regularly for a substantial period in afarming business. Whether the property has been regularly used for asubstantial period depends on all the facts and circumstances. Liquidation of a farming business.alberghi a SivigliaIf you (or your partnership or S corporation) liquidate yourfarming business, gains on property sold within a reasonable timeafter operations stop can be designated as EFI. A period of one yearafter stopping operations will be treated as a reasonable time. Afterthat, what is a reasonable time depends on the facts andcircumstances. Shifting EFI to base years.If your EFI includes both ordinary income and capital gains, youmust add an equal portion of each type of income to each base year.You cannot add all of the capital gains to a single base year. How To Figure the Tax If you elect to average your farm income, you will figure thecurrent year's tax on Schedule J (Form 1040). You figure the tax asfollows. Subtract the EFI from your total taxable income. Figure the tax on the result in step (1) using the currentyear's tax tables, tax rate schedules, or, if applicable and lower,the maximum capital gain tax rates. For each of the base years, make the followingcomputations. Add one-third of the EFI to the taxable income of the baseyear. Do not treat the base year's taxable income as less than zero,even if your deductions exceed your income. Figure the tax on the result in (a) using the tax rateschedule for that base year, or, if applicable and lower, the maximumcapital gain tax rate for the base year. If the EFI includes a netcapital gain, it does not offset any net capital loss you had in thebase year. Figure the tax on the net capital gain at the maximumcapital gain tax rate that would apply if an asset of the same typeand with the same holding period had been sold or exchanged in thebase year. Subtract that year's actual tax from the tax in (b). Add the results in step (3)(c) to the amount in step (2).The result is the tax for the current year. Filing status.You are not prohibited from making a farm income averaging electionsolely because your filing status is not the same in an election yearand the base years. For example, if you are married filing jointly inthe election year, but filed as single in all of the base years, youmay still elect to average farm income. Effect on Other Tax Determinations You subtract your EFI from your taxable income in the election yearand add one-third of it to the taxable income of the base year todetermine the tax rate to use for income averaging. The allocation ofyour EFI from the election year to the base years does not affectother tax determinations. For example, you make the followingdeterminations before subtracting your EFI in the electionyear or adding it in the base years. Glasgow Alojamientos baratosThe amount of your self-employment tax. Whether, in the aggregate, sales and other dispositions ofbusiness property (section 1231 transactions) produce long-termcapital gain or ordinary loss. The amount of any net operating loss carryover or netcapital loss carryover applied and the amount of any carryover toanother year. The limit on itemized deductions based on your adjustedgross income. The amount of any net capital loss or net operating loss ina base year. Tax on Investment Incomeof Child Under 14 If your child's investment income is more than $1,400, part of thatincome may be taxed at your tax rate instead of your child's tax rate. If you elect to use farm income averaging, figure your child's taxon investment income using your rate after shifting EFI. You cannotuse any of your child's investment income as your EFI, even if it isattributable to a farming business. For information on figuring thetax on your child's investment income, see Publication 929, TaxRules for Children and Dependents. Alternative Minimum Tax You cannot use income averaging to determine your alternativeminimum tax (AMT). When figuring your AMT, the regular tax yousubtract from your "tentative minimum tax" is the tax youcomputed using farm income averaging. This may cause you to owe AMT orincrease your AMT but, generally, it will not increase your total tax. Caution: As this publication was being prepared for print, Congress wasconsidering legislation that would allow an individual to offset hisor her regular tax (without regard to the "tentative minimumtax") by certain nonrefundable personal credits (such as the creditfor child and dependent care expenses, the child tax credit, the Hopecredit, or the lifetime learning credit). For more information aboutthis and other important tax changes, see Publication 553,Highlights of 1999 Tax Changes. mejor casinos en linesCredit for base year minimum tax liability.You can use income averaging to calculate your regular taxliability for the purpose of determining the amount of the credit fora base year minimum tax liability. Making, Revoking, orChanging an Election You make a farm income averaging election by filing Schedule J(Form 1040), Farm Income Averaging, with your timely filed(including extensions) return for the election year. You can make alate election, or amend or revoke a previously made election, only ifyou do so in conjunction with another adjustment that affects thetaxable income of the election year or any of the base years. Anadjustment may be caused by a variety of things. The following areexamples of situations that may result in an adjustment. An NOL carryback. A disaster loss election. A change made as the result of an audit. Any other change that results in your filing an amendedreturn. If you do not have an adjustment in the election year or any ofthe base years, you can make a late election, or amend or revoke apreviously made election, only if you obtain the consent of the IRS.You can request consent by submitting a request for a private letterruling to the IRS National Office. See Revenue Procedure 2000-1in Internal Revenue Bulletin No. 2000-1.