Instructions For Form Fia-40n, Form Fia-40p, And Schedule Z, For Farm Income Averaging

2002

Instructions for Form FIA-40N, Form FIA-40P,

O R E G O N

D E PA R T M E N T

and Schedule Z, for Farm Income Averaging

O F R E V E N U E

You may elect to figure your 2002 tax by averaging, over the

• Leasing land to a tenant engaged in a farming business, but

previous three years (base years), all or part of your 2002 tax-

only if the lease payments are based on a share of the tenant’s

able farm income. Making this election may give you a lower

production (not a fixed amount).

tax if your 2002 farm income is high and your taxable income

• Wages and other compensation you received as a shareholder

for one or more of the three prior years was low.

in an S corporation engaged in a farming business.

You will need copies of your original or amended

A farming business does not include:

Oregon income tax returns for tax years 1999, 2000, and 2001

• Contract harvesting of an agricultural or horticultural com-

to figure your tax on Form FIA-40P or Form FIA-40N. You can

modity grown or raised by someone else, or

obtain copies of prior years’ returns for a fee from the Oregon

• Merely buying or reselling plants or animals grown or raised

Department of Revenue. See Taxpayer Assistance on page 5 for

by someone else.

numbers to call.

Instructions for Schedule Z

Elected farm income

You will need to complete Form FIA-40N through line 11 or

Your elected farm income is the amount of your taxable income

Form FIA-40P through line 9 before you can complete Sched-

from farming that you elect to include on Form FIA-40P or FIA-

ule Z. You will need the figure from line 2(b) of Form FIA-40N

40N, line 2. Do not enter more than the amount on line 1.

or FIA-40P to recalculate Oregon tax for tax years 1999, 2000, and

To figure elected farm income, first figure your taxable income

2001. On Schedule Z, complete either Computation A, B, or C

from farming. Taxable income from farming includes all in-

for each tax year. Figures from Schedule Z are needed to com-

come, gains, losses, and deductions attributable to any farming

plete Form FIA-40, lines 8, 12, and 16; Form FIA-40N, lines 12

business. However, it does not include gain from the sale or

through 14; or Form FIA-40P, lines 10 through 12.

other disposition of land. Gains and losses must be from prop-

If you were a part-year resident or a nonresident for 1999, 2000,

erty (other than land) regularly used by you in the farm busi-

or 2001 and if your income after subtractions (line 39) for either

ness for a substantial period of time. Oregon source farm

federal or Oregon was zero or less for any of these three tax

income includes income or loss received from an Oregon farm

years, use the worksheets below to figure the amount to enter

while you were a nonresident and farm income or loss received

on Schedule Z, Computation A or B, line 1.

during any portion of the year you were an Oregon resident.

1999 Taxable Income Worksheet

You do not have to include all of your taxable income from

farming on Form FIA-40P or FIA-40N, line 2. It may be to your

Part-Year or Nonresident Return for 1999

advantage to include less than the full amount, depending on

1. Figure income after

Oregon (b)

Federal (a)

how the amount you include on line 2 affects your tax bracket

subtractions for either

for the current and prior three tax years.

federal or Oregon, or both,

Your elected farm income cannot exceed your Oregon taxable

from your 1999 Form 40P

income. Also, the portion of your elected farm income treated

or Form 40N without

as a net capital gain cannot exceed the smaller of your total net

limiting it to zero. If you

capital gain or your net capital gain attributable to your farm-

had a net operating loss

ing business.

(NOL) for 1999, do not

include any NOL carry-

If your elected farm income includes net capital gain, you must

overs or carrybacks to

allocate an equal portion of the net capital gain to each of the

1999. Enter the result as

base years.

a positive amount here ............... $ ________ $ ________

If, for any base year, you had a capital loss that resulted in a

2. If you have a capital loss

capital loss carryover to the next tax year, do not reduce the

in either or both columns

elected farm income allocated to that base year by any part of

on Form 40P or Form 40N,

the carryover.

you must make an addi-

tional computation. If

Farming business

there is a loss on your

1999 federal Schedule D,

A farming business is the trade or business of cultivating land

line 18, add that loss

or raising or harvesting any agricultural or horticultural com-

(as a positive amount)

modity. This includes:

and your 1999 capital

• Operating a nursery or sod farm.

loss carryover to 2000.

• Raising or harvesting trees bearing fruits, nuts, or other crops.

Subtract from that sum

• Raising ornamental trees (but not evergreen trees that are

the amount of the loss

more than 6 years old when severed from the roots).

on your 1999 federal

• Raising, shearing, feeding, caring for, training, and manag-

Schedule D, line 17.

ing animals.

Enter the result here .................... $ ________ $ ________

Instructions For Form Fia-40n, Form Fia-40p, And Schedule Z, For Farm Income Averaging - 2002

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