Instruction For Schedule J - 2005 printable pdf download

Department of the Treasury

Internal Revenue Service

2005 Instructions for Schedule J

Use Schedule J (Form 1040) to elect to figure your 2005 tax by averaging, over the previous

Income

3 years (base years), all or part of your 2005 taxable income from your trade or business of

farming or fishing. This election may give you a lower tax if your 2005 income from farming

Averaging for

or fishing is high and your taxable income for one or more of the 3 prior years was low.

This election does not apply when figuring your alternative minimum tax on Form 6251.

Also, you do not have to recompute, because of this election, the tax liability of any minor

Farmers and

child who was required to use your tax rates in the prior years.

Fishermen

Fishing business.

A fishing business is the

2. It may be to your advantage to include

General Instructions

trade or business of fishing in which the

less than the full amount, depending on

fish harvested, either in whole or in part,

how the amount you include on line 2 af-

Prior Year Tax Returns

are intended to enter commerce or enter

fects your tax bracket for the current and

commerce through sale, barter, or trade.

prior 3 tax years.

You may need copies of your original or

This includes:

amended income tax returns for 2002,

Your elected farm income cannot ex-

2003, and 2004 to figure your tax on

1. The catching, taking, or harvesting of

ceed your taxable income. Also, the portion

Schedule J. If you do not have copies of

fish;

of your elected farm income treated as a net

those returns, you can get them by filing

2. The attempted catching, taking, or

capital gain cannot exceed the smaller of

Form 4506. There is a $39 fee for each re-

harvesting of fish;

your total net capital gain or your net capi-

turn requested. If your main home, princi-

3. Any other activity which can reasona-

tal gain attributable to your farming or fish-

pal place of business, or tax records are

bly be expected to result in the catching,

ing business. If your elected farm income

located in a Presidentially declared disaster

taking, or harvesting of fish; or

includes net capital gain, you must allocate

area, the fee will be waived. If you want a

4. Any operations at sea in support of, or

an equal portion of the net capital gain to

free transcript of your tax return, use Form

in preparation for, any activity described in

each of the base years. If, for any base year,

4506-T. See your Form 1040 instruction

(1) through (3) above.

booklet to find out how to get these forms.

you had a capital loss that resulted in a cap-

Keep a copy of your 2005 income tax re-

ital loss carryover to the next tax year, do

The word fish means finfish, mollusks,

turn for use in 2006, 2007, or 2008.

not reduce the elected farm income allo-

crustaceans, and all other forms of marine

cated to that base year by any part of the

animal and plant life other than marine

Definitions

carryover.

mammals and birds.

Farming business.

A farming business is

A fishing business does not include any

the trade or business of cultivating land or

Generally, income, gains,

scientific research activity which is con-

raising or harvesting any agricultural or

losses, and deductions from

ducted by a scientific research vessel.

TIP

horticultural commodity. This includes:

farming or fishing are reported

Additional Information

on:

1. Operating a nursery or sod farm;

•

Form 1040, line 7, to the extent of

See Regulations section 1.1301-1 for more

2. Raising or harvesting of trees bearing

wages and other compensation you

details.

fruits, nuts, or other crops;

received as a shareholder in an S

3. Raising ornamental trees (but not ev-

corporation engaged in a farming or

ergreen trees that are more than 6 years old

fishing business;

Specific Instructions

when severed from the roots);

•

Schedule C or C-EZ;

4. Raising, shearing, feeding, caring for,

•

Schedule D;

training, and managing animals; and

•

Line 2

Schedule E, Part II;

5. Leasing land to a tenant engaged in a

•

Schedule F;

farming business, but only if the lease pay-

•

Elected Farm Income

Form 4797; and

ments are (a) based on a share of the

•

tenant’s production (not a fixed amount),

To figure elected farm income, first figure

Form 4835.

and (b) determined under a written agree-

your taxable income from farming or fish-

ment entered into before the tenant begins

ing. This includes all income, gains, losses,

significant activities on the land.

and deductions attributable to any farming

Line 4

or fishing business. However, it does not

include gain from the sale or other disposi-

Figure the tax on the amount on line 3 using

A farming business does not include:

tion of land.

the 2005 Tax Table, Tax Computation

•

Contract harvesting of an agricultural

Worksheet, or Qualified Dividends and

Your elected farm income is the amount

or horticultural commodity grown or raised

Capital Gain Tax Worksheet from the 2005

of your taxable income from farming or

by someone else, or

Instructions for Form 1040, or the Schedule

fishing that you elect to include on line 2.

•

D Tax Worksheet in the 2005 Instructions

Merely buying or reselling plants or

You do not have to include all of your tax-

animals grown or raised by someone else.

able income from farming or fishing on line

for Schedule D. Enter the tax on line 4.

J-1

Cat. No. 25514J

Instruction For Schedule J - 2005

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