Instructions For 2006 Form Fia-40 - Farm Income Averaging (Page 3 of 4) in pdf

Example 1. Kevin Crooper did not income average for tax

Form FIA-40, line 4 on line 20 of the 2006 Form FIA-40. He

year 2003 or 2004 but he did income average for tax year

adds lines 18, 19, and 20 and enters $1,585 on line 21. This

2005 and he wants to income average for tax year 2006. For

is the recomputed tax he paid for the 2003, 2004, and 2005

tax years 2003, 2004, and 2005 Kevin filed joint returns. His

tax years.

filing status for tax year 2006 is also married filing jointly.

He subtracts the recomputed tax of $1,585 on line 21 from the

For tax year 2003, Kevin’s taxable income from Form 40, line

recomputed tax of $3,573 on line 17 and enters the result of

28 is $1,112. For tax year 2004, Kevin’s taxable income from

$1,988 on line 22. This is Kevin’s 2006 tax liability from farm

Form 40, line 28 is $14,250. For tax year 2005, Kevin’s taxable

income averaging. He enters this figure on Form 40, line 29,

income from Form 40, line 28 is $12,777. For tax year 2006,

and checks box 29b.

Kevin’s taxable income from Form 40, line 28 is $27,900 and

his elected farm income is $24,000. For the tax years above,

Example 2. John Farmington did not use farm income av er -

he has no net operating losses, no net operating carryfor-

ag ing for 2003, 2004, or 2005. For tax year 2006, John has

wards or carrybacks and no capital losses.

elect ed farm income on Form FIA-40, line 2 of $18,000. His

Or e gon tax able income shown on his 2003 Form 40, line 28,

Kevin income averaged for tax year 2005. Kevin had $12,777

is $6,150.

of taxable income and elected to farm income average $9,000,

leaving Oregon taxable income on his 2005 form FIA-40, line

John had a net operating loss (NOL) for tax year 2004 of

3, of $3,777. For 2003, Kevin’s recomputed taxable income

$22,950, which he elected to carryback five years. Of the

after adding one-third of elected farm income from his 2005

$22,950 loss, $9,000 was car ried back to tax year 2003. To

Form FIA-40, line 11 is $4,112. For 2004, Kevin’s recomputed

com plete line 1 of the 2003 worksheet, John com bines the

taxable income after adding one-third of his elected farm

$9,000 net op er at ing loss de duc tion (NOLD) with his 2003

income from his 2005 Form FIA-40, line 15 is $17,250. For

Or e gon tax able in come of $6,150 from Form 40, line 28. The

2005, Kevin’s recomputed tax after removing his elected

result, a neg a tive $2,850, is en tered on line 1 of the 2003

farm income is $188 from 2005 Form FIA-40, line 4.

worksheet.

For tax year 2006, Kevin’s Oregon taxable income is $27,900.

When John filed his 2003 tax return, he had a $3,000 net cap-

On line 2 Kevin enters his elected farm income of $24,000.

i tal loss deduction on federal Schedule D, line 18, a $7,000

He subtracts line 2 from line 1 and enters $3,900 on line 3.

loss on federal Schedule D, line 17a, and a $4,000 cap i tal

This is his remaining Oregon taxable income. He calculates

loss carryover to 2004. However, when John car ried back

his 2006 Oregon tax using the tax tables under married filing

the 2004 NOL to 2003, he refigured his 2003 capital loss car-

joint status and enters $198 on line 4.

ryover to tax year 2004 as $7,000. To cal cu late line 2 of the

2003 worksheet, John adds the $3,000 from fed er al Sched ule

For 2003, Kevin enters $4,112 from line 11, 2005 Form FIA-

D, line 18, and the $7,000 carryover. He sub tracts from the

40 on line 5 of the 2006 Form FIA-40. He divides his elected

re sult the $7,000 loss on his federal Sched ule D, line 17a, and

farm income of $24,000 by 3 and enters $8,000 on line 6 of

en ters $3,000 on line 2 of the 2003 worksheet.

the 2006 Form FIA-40. He adds lines 5 and 6 and enters

$12,112 on line 7. This is his recomputed 2003 Oregon tax-

John had $6,150 of Oregon taxable income in 2003 that

able income. He calculates his 2003 Oregon tax using the

reduced the 2004 NOL carryback. The $3,000 net capital loss

2003 tax tables under married filing joint status and enters

de duc tion also reduced the amount of the 2004 NOL carry-

$749 on line 8.

back. Since these two figures together total $9,150, there is

no NOLD left to carry over to tax year 2005. There fore, John

For 2004, Kevin enters $17,250 from line 15, 2005 Form FIA-

enters -0- on line 3. John adds line 1, a negative $2,850, line 2,

40 on line 9 of the 2006 Form FIA-40. He enters $8,000 from

a positive $3,000, and line 3. He enters the result, a pos i tive

line 6 (2006 Form FIA-40) on line 10 of the 2006 Form FIA-40.

$150, on line 4 of the worksheet and on 2006 Form FIA-40,

He adds lines 9 and 10 and enters $25,250 on line 11. This is

line 5. This fig ure rep re sents John’s re com put ed Or e gon

his recomputed 2004 Oregon taxable income. He calculates

taxable in come for tax year 2003.

his 2004 Oregon tax using the 2004 tax tables under married

filing joint status and enters $1,909 on line 12.

For tax year 2004, John’s taxable income from Form 40, line

28 is negative $30,250, which he enters on line 5 of the 2004

For 2005, Kevin enters $3,777 from line 3, 2005 Form FIA-40

worksheet.

on line 13 of the 2006 Form FIA-40. He enters $8,000 from

line 6 (2006 Form FIA-40) on line 14 of the 2006 Form FIA-40.

John had a $3,000 net capital loss deduction on Sched ule D,

He adds lines 13 and 14 and enters $11,777 on line 15. This is

line 21 and a $7,000 loss on Schedule D, line 16, the carryover

his recomputed 2005 Oregon taxable income. He calculates

from 2003 to 2004. John adds the $3,000 from Sched ule D,

his 2005 Oregon tax using 2005 the tax tables under married

line 21, and the $7,000 carryover. He sub tracts from the re sult

filing joint status and enters $717 on line 16.

the $7,000 loss on Schedule D, line 16, and en ters $3,000 on

line 6 of the worksheet. John enters $22,950 on line 7 of the

On his 2006 Form FIA-40, he adds lines 4, 8, 12, and 16 and

worksheet, his 2004 NOL.

enters $3,573 on line 17. He enters his recomputed 2003 tax

of $208 from 2005 Form FIA-40, line 12 on line 18 of the 2006

John adds lines 5, 6, and 7 (< $30,250 > + $3,000 + $22,950)

Form FIA-40. He enters his recomputed 2004 tax of $1,189

and enters the result, a negative $4,300, on line 8 of the

from 2005 Form FIA-40, line 16 on line 19 of the 2006 Form

worksheet and on 2006 Form FIA-40, line 9. This fig ure

FIA-40. He enters his recomputed 2005 tax of $188 from 2005

Instructions For 2006 Form Fia-40 - Farm Income Averaging Page 3

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