Fillable Form Fia-40n - Oregon Farm Income Averaging

2011

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

and Schedule Z, for 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 to

• Operating a nursery or sod farm.

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

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

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

crops.

Oregon Department of Revenue. You will also need tax

• Raising ornamental trees (but not evergreen trees that are

booklets for those years. You can download the forms and

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

instructions from our website or see page 4 to contact us.

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

ing animals.

Elected farm income

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

Your elected farm income is the amount of your taxable

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

income from farming that you elect to include on Form

tenant’s production (not a fixed amount).

FIA-40N or Form FIA-40P, line 2. Do not enter more than

• Wages and other compensation you received as a share-

the amount on line 1.

holder in an S corporation engaged in a farming busi-

ness.

To figure elected farm income, first figure your taxable

income from farming. Taxable income from farming includes

A farming business does not include:

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

• Contract harvesting of an agricultural or horticultural

farming business. However, it does not include gain from

commodity grown or raised by someone else, or

the sale or other disposition of land. Gains and losses must

• Merely buying or reselling plants or animals grown or

be from property (other than land) regularly used by you in

raised by someone else.

the farm business for a substantial period of time. Oregon

source farm income includes income or loss received from an

Instructions for Schedule Z

Oregon farm while you were a nonresident and farm income

or loss received during any portion of the year you were an

Before you can complete Schedule Z you will need the

Oregon resident.

amount from FIA-40, line 6; Form FIA-40N, line 10; or Form

FIA-40P, line 9. On Schedule Z, complete either Computa-

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

tion A, B, or C for each tax year. Figures from Schedule Z

farming on Form FIA-40N or Form FIA-40P, line 2.

are needed to complete Form FIA-40N, lines 11 through 13;

Your elected farm income cannot exceed your Oregon tax-

or Form FIA-40P, lines 10 through 12. If you filed Form 40N

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

or 40P in 2008, 2009, or 2010, complete Schedule Z for Form

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

FIA-40, lines 8, 12, and 16.

total net capital gain or your net capital gain attributable to

If you were a part-year resident or a nonresident for 2008,

your farming business.

2009, or 2010 and if your income after subtractions for either

If your elected farm income includes net capital gain, you

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

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

years, use the worksheets below to figure the amount to

of the base years.

enter on Schedule Z, Computation A or B, line 1. If you were

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

a full year resident with taxable income that was -0- or less

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

for 2008, 2009, or 2010, use the worksheets below to figure

elected farm income allocated to that base year by any part

the amount to enter on Schedule Z, Computation C, line 1.

of the carryover.

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 to which the NOL is carried.

150-101-161 (Rev. 12-11)

Form Fia-40n - Oregon Farm Income Averaging - 2011 Page 6

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