Fillable Form Fia-40 - Oregon Farm Income Averaging

INSTRUCTIONS FOR 2011 FORM FIA-40

Farm Income Averaging

Farming business

You may elect to figure your 2011 tax by averaging, over the

previous three years (base years), all or part of your 2011

A farming business is the trade or business of cultivating

taxable farm income.

land or raising or harvesting any agricultural or horticultural

You will need copies of your original or amended Oregon

commodity. This includes:

income tax returns for tax years 2008, 2009, and 2010. 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 other

Oregon Department 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 taxpayer assistance on page 4

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

for numbers to call.

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

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

ing animals.

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

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

tation 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 nonresident returns, ignore the

tenant’s production (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 computed tax from

holder in an S corporation engaged in a farming busi-

Schedule Z on lines 8, 12, and 16.

ness.

A farming business does not include:

Elected farm income

• Contract harvesting of an agricultural or horticultural

Your elected farm income is the amount of your taxable

commodity grown or raised by someone else, or

income from farming that you elect to include on Form

• Merely buying or reselling plants or animals grown or

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

raised by someone else.

2, if you elect to use farm income averaging for federal. Do

not enter more than the amount on Form FIA-40, line 1.

Line instructions

To figure elected farm income, first figure your taxable

Line 5, 2008 taxable income. If you used FIA to figure your

income from farming. Taxable income from farming includes

tax for 2010, enter on line 5 the amount from your 2010 FIA-

all income, gains, losses, and deductions attributable to any

40, line 11. If you used Schedule Z to figure your tax for 2010

farming business. Gains and losses from the sale or other

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

disposition of property (other than land) must be from

from your 2010 Schedule Z, Computation for Tax Year 2008.

property regularly used for a substantial period of time in

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

your farming business. However, it does not include gain

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

from the sale or other disposition of land. You do not have

Computation C, use the amount on line 3.

to include all of your taxable income from farming on Form

FIA-40, line 2.

If you used FIA to figure your tax for 2009 but not 2010,

enter on line 5 the amount from your 2009 FIA-40, line 15.

Your elected farm income cannot exceed your Oregon tax-

If you used Schedule Z to figure your tax for 2009 on FIA-

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

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

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

your 2009 Schedule Z, Computation for Tax Year 2008. If

total net capital gain or your net capital gain attributable to

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

your farming business. If your elected farm income includes

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

net capital gain, you must allocate an equal portion of the

Computation C, use the amount on line 3.

net capital gain to each of the base years.

If you used FIA to figure your tax for 2008 but did not for

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

2009 or 2010, enter on line 5 the amount from your 2008 FIA-

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

40, line 3; FIA-40N, line 8; or FIA-40P, line 6.

elected farm income allocated to that base year by any part

of the carryover.

If your 2008 taxable income was -0- or less, use the worksheet

below to figure the amount to enter on Form FIA-40, line 5.

150-101-160 (Rev. 12-11)

Form Fia-40 - Oregon Farm Income Averaging - 2011 Page 2

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