§447 — Method of accounting for corporations engaged in farming
23 cases·2 distinguished·21 cited
Statute Text — 26 U.S.C. §447
Except as otherwise provided by law, the taxable income from farming of—
a corporation engaged in the trade or business of farming, or
a partnership engaged in the trade or business of farming, if a corporation is a partner in such partnership,
shall be computed on an accrual method of accounting. This section shall not apply to the trade or business of operating a nursery or sod farm or to the raising or harvesting of trees (other than fruit and nut trees).
For rules requiring capitalization of certain preproductive period expenses, see section 263A.
For purposes of subsection (a), a corporation shall be treated as not being a corporation for any taxable year if it is—
an S corporation, or
a corporation which meets the gross receipts test of section 448(c) for such taxable year.
Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary.
Notwithstanding subsection (a) or section 263A, if—
for its 10 taxable years ending with its first taxable year beginning after
December 31, 1975
, a corporation or qualified partnership used an annual accrual method of accounting with respect to its trade or business of farming,
such corporation or qualified partnership raises crops which are harvested not less than 12 months after planting, and
such corporation or qualified partnership has used such method of accounting for all taxable years intervening between its first taxable year beginning after
December 31, 1975
, and the taxable year,
such corporation or qualified partnership may continue to employ such method of accounting for the taxable year with respect to its qualified farming trade or business.
For purposes of paragraph (1), the term “annual accrual method of accounting” means a method under which revenues, costs, and expenses are computed on an accrual method of accounting and the preproductive period expenses incurred during the taxable year are charged to harvested crops or deducted in determining the taxable income for such years.
For purposes of this subsection, if—
a corporation acquired substantially all the assets of a qualified farming trade or business from another corporation in a transaction in which no gain or loss was recognized to the transferor or transferee corporation, or
a qualified partnership acquired substantially all the assets of a qualified farming trade or business from one of its partners in a transaction to which section 721 applies,
the transferee corporation or qualified partnership shall be deemed to have computed its taxable income on an annual accrual method of accounting during the period for which the transferor corporation or partnership computed its taxable income from such trade or business on an annual accrual method.
For purposes of this subsection—
The term “qualified partnership” means a partnership which is engaged in a qualified farming trade or business and each of the partners of which is a corporation other than—
an S corporation, or
a personal holding company (within the meaning of section 542(a)).
The term “qualified farming trade or business” means the trade or business of farming—
sugar cane,
any plant with a preproductive period (as defined in section 263A(e)(3)) of 2 years or less, and
any other plant (other than any citrus or almond tree) if an election by the corporation under this subparagraph is in effect.
For purposes of paragraphs (1) and (2) of section 263A(e), any election under this subparagraph shall be treated as if it were an election under subsection (d)(3) of section 263A.
Unless the Secretary otherwise consents, an election under this subparagraph may be made only for the corporation’s 1st taxable year which begins after December 31, 1986, and during which the corporation engages in a farming business. Any such election, once made, may be revoked only with the consent of the Secretary.
In the case of a partnership and for purposes of paragraph (3)(A), subclauses (II) and (III) shall not apply.
23 Citing Cases
Section 447--Method of Accounting for Corporations Engaged in Farming Section 447 provides that taxable income from farming of a corporation engaged in the trade or business of farming “shall be computed on an accrual method of accounting”. Sec. 447(a). Section 447, however, does not apply to the trade or business of harvesting trees that are not f
would disallow all ofthe claimed deductions on Schedule F for all these years. For 2005 and 2006, the notice ofdeficiency had disallowed all the claimed expenses on Schedule F based on a theory ofcapitalization--albeitunder a different Code section (section 447). This isjust a new theory (a new argument about the existing evidence) as opposed to a new matter (an argument that reasonably would alter the evidence required), see Hurst, 124 T.C. at 30, so there's no need to shift the burden ofprooff
would disallow all ofthe claimed deductions on Schedule F for all these years. For 2005 and 2006, the notice ofdeficiency had disallowed all the claimed expenses on Schedule F based on a theory ofcapitalization--albeitunder a different Code section (section 447). This isjust a new theory (a new argument about the existing evidence) as opposed to a new matter (an argument that reasonably would alter the evidence required), see Hurst, 124 T.C. at 30, so there's no need to shift the burden ofprooff
(continued...) - 31 - refer to “the number of months * * * remaining in the period”.11 10(...continued) working life”); sec. 418B(d)(3)(C)(ii) (“the average of the remaining expected lives”); sec. 404(a)(1)(A)(ii) (“the remaining future service”); sec. 447(f)(3),(i)(5)(C) (“the remaining taxable years”); sec. 7702A(c)(3)(B)(ii) (“the remaining period”); secs. 1274(d)(1)(C)(i), 9501(c)(3), 9507(d)(3)(C), 9509(d)(3)(C) (“remaining periods to maturity”); sec. 542(d)(1)(B) (“the remaining maturity”
iod”); sec. 412(b)(4) (“the remaining amortization period”); sec. 192(c)(l)(B)(i) (“the average remaining working life”); sec. 418B(d)(3)(C)(ii) (“the average of the remaining expected lives”); sec. 404(a)(l)(A)(ii) (“the remaining future service”); sec. 447(f)(3), (i)(5)(C) (“the remaining taxable years”; sec. 7702A(c)(3)(B)(ii) (“the remaining period”); secs. 1274(d)(l)(C)(i), 9501(c)(3), 9507(d)(3)(C), 9509(d)(3)(C) (“remaining periods to maturity”); sec. 542(d)(1)(B) ("the remaining maturity
447.361 (2000) states: “Under a risk contract, Medicaid payments to the contractor, for a defined scope of services to be furnished to a defined number of recipients, may not exceed the cost to the agency of providing those same services on a fee-for-service basis, to an actuarially equivalent nonenrolled population group.” - 25 - provision o