Instructions For 2006 Form Fia-40 - Farm Income Averaging printable pdf download

INSTRUCTIONS FOR 2006 FORM FIA-40

Farm Income Averaging

You may elect to figure your 2006 tax by averaging, over the

Farming business

previous three years (base years), all or part of your 2006

A farming business is the trade or business of cul ti vat ing

tax able farm income.

land or raising or harvesting any agricultural or hor ti cul tur al

You will need copies of your original or amended Oregon

commodity. This includes:

income tax returns for tax years 2003, 2004, and 2005. You

• Operating a nursery or sod farm.

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

• Raising or harvesting of trees bearing fruits, nuts, or oth er

Oregon De part ment of Revenue. You will also need tax book-

crops.

lets for those years. You can download forms and instruc-

• Raising ornamental trees (but not evergreen trees that are

tions from our website or see Tax pay er As sis tance on page

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

6 for numbers to call.

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

If you filed an Oregon part-year or nonresident return in any

ag ing animals.

of the three base years, you will need Schedule Z, Com pu -

• Leasing land to a tenant engaged in a farming busi ness,

ta tion of Tax, to complete Form FIA-40. If any of the three

but only if the lease payments are based on a share of the

base years are part-year or non res i dent re turns, ignore the

tenant’s pro duc tion (not a fixed amount).

computation of tax for the applicable year on Form FIA-40

• Wages and other compensation you received as a share-

and complete Schedule Z. Fill in the com put ed tax from

hold er in an S corporation engaged in a farming busi ness.

Sched ule Z on lines 8, 12, and 16.

A farming business does not include:

Elected farm income

• Contract harvesting of an agricultural or hor ti cul tur al

com mod i ty grown or raised by someone else, or

Your elected farm income is the amount of your taxable

• Merely buying or reselling plants or animals grown or

income from farming that you elect to include on Form FIA-

raised by someone else.

40, line 2. This is the amount on federal Schedule J, line 2, if

you elect to use farm income averaging for fed er al. Do not

Line instructions

enter more than the amount on Form FIA-40, line 1.

Line 5, 2003 taxable income. If you used FIA-40 to figure

To figure elected farm income, first fig ure your taxable

your tax for 2005, enter on line 5 the amount from your 2005

income from farming. Taxable income from farm ing in cludes

FIA-40, line 11. If you used Schedule Z to figure your tax

all income, gains, losses, and deductions at trib ut able to any

for 2005 on FIA-40, FIA-40N, or FIA-40P, enter on line 5 the

farming business. Gains and losses from the sale or other

amount from your 2005 Schedule Z, Computation for Tax

dis po si tion of property (other than land) must be from

Year 2003. If you used Computation A, use the amount on

prop er ty regularly used for a sub stan tial pe ri od of time in

line 9. If you used Computation B, use the amount on line 6.

your farm ing business. However, it does not in clude gain

If you used Computation C, use the amount on line 3.

from the sale or oth er dis po si tion of land. You do not have

to in clude all of your tax able in come from farm ing on Form

If you used FIA-40 to figure your tax for 2004 but not 2005,

FIA-40, line 2.

enter on line 5 the amount from your 2004 FIA-40, line 15.

If you used Sched ule Z to figure your tax for 2004 on FIA-

Your elected farm income cannot exceed your Oregon tax-

40, FIA-40N, or FIA-40P, enter on line 5 the amount from

able income. Also, the portion of your elected farm in come

your 2004 Schedule Z, Computation for Tax Year 2003. If

treat ed as a net capital gain cannot exceed the small er of your

you used Com pu ta tion A, use the amount on line 9. If you

total net capital gain or your net capital gain at trib ut able to

used Computation B, use the amount on line 6. If you used

your farming business. If your elect ed farm income in cludes

Computation C, use the amount on line 3.

net capital gain, you must al lo cate an equal por tion of the

net cap i tal gain to each of the base years.

If you used FIA-40 to figure your tax for 2003 but did not

for 2004 or 2005, enter on line 5 the amount from your 2003

If, for any base year, you had a capital loss that re sult ed in a

FIA-40, line 3. If you used FIA-40N, enter the amount from

capital loss carryover to the next tax year, do not re duce the

your 2003 FIA-40N, line 8. If you used Form FIA-40P, enter

elected farm income al lo cat ed to that base year by any part

the amount from your 2003 FIA-40P, line 6.

of the carryover.

If your 2003 tax able in come was -0- or less, use the worksheet

be low to fig ure the amount to enter on Form FIA-40, line 5.

NOL means net operating loss and applies to the year of the

actual loss. NOLD means net operating loss deduction and

applies to the year the NOL is carried to.

Instructions For 2006 Form Fia-40 - Farm Income Averaging

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