Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 63-26

1963-1 C.B. 295

Sec. 1202

Sec. 6073

Caution: Modified by Rev. Rul. 80-366

IRS Headnote

The term `estimated gross income from farming,' as used in section 6073(b) of the Internal Revenue Code of 1954 includes gains from the sale of livestock used in the trade or business of farming and held by the taxpayer for draft, breeding or dairy purposes. The entire amount of such gains must be included in estimated gross income from farming without regard to any deduction allowable under section 1202 of the Code with respect to such gains.

The term `estimated gross income from farming' does not include gains from the sale of farm lands and depreciable farm equipment.

Full Text

Rev. Rul. 63-26

Advice has been requested whether the term `estimated gross income from farming,' as used in section 6073(b) of the Internal Revenue Code of 1954, includes (1) gains from the sale of livestock held for draft, breeding or dairy purposes and (2) gains from the sale of farm land and depreciable farm equipment; and, if so, whether the amount so included is reduced by the amount of any deduction allowable under section 1202 of the Code with respect to such gains.

It is provided in section 6073(b) of the Code that declarations of estimated tax required from individuals whose estimated gross income from farming for the taxable year is at least two-thirds of the total estimated gross income from all sources for the taxable year may, in lieu of the time prescribed in section 6073(a) of the Code (for individuals other than farmers), be filed at any time on or before January 15 of the succeeding taxable year.

Section 1.6073-1(b) of the Income Tax Regulations, does not expressly answer the question under consideration here when it defines `estimated gross income from farming' as the estimated income resulting from `the cultivation of the soil and the raising or harvesting of any agricultural or horticultural commodities and the raising of livestock, bees or poultry.' However, section 1.175-5(a)(2) of the regulations defines the term `gross income from farming,' for purposes of section 175 of the Code, to include gains from sales of draft, breeding or dairy livestock but not gains from sales of assets such as farm machinery or gains from the disposition of land.

Although section 175 and section 6073(b) of the Code have different objectives, both sections employ the term `gross income from farming' and the same meaning is attributable to that term in interpreting each section.

The legislative history of section 6073(b) of the Code indicates that this interpretation would carry out the purpose of Congress in allowing the privilege of a later filing date for farmers. Section 60(a) of the Internal Revenue Code of 1939 (the predecessor of section 6073(b) of the 1954 Code) was added by section 5(a) of the Current Tax Payment Act of 1943. The committee reports indicate that this provision of the Code resulted from a recognition of the difficulty of estimating farm income in the early part of the year in view of such factors as `weather conditions, plant and animal diseases, and ravages of insects and other pests.' This reasoning would inferentially require the inclusion of gains from the sales of draft, breeding or dairy livestock in `estimated gross income from farming.' On the other hand, it does not require or justify the inclusion in such `estimated gross income' of any gains from the sales of land or farm equipment which are not similarly affected by the uncertainties which prompted Congress to extend the privilege of a later filing date for farmers. See H.R. Report No. 401, Seventy-eighth Congress, C.B. 1943, 1283, at 1310, and S. Report No. 221 , Seventy-eighth Congress, C.B. 1943, 1314, at 1344.

Accordingly, it is held that the term `estimated gross income from farming,' as used in section 6073(b) of the Code, includes gains from the sale of livestock used in the trade or business of farming and held for draft, breeding or dairy purposes, but it does not include gains from the sale of either farm land or farm equipment subject to an allowance for depreciation.

Section 1202 of the Code provides (in pertinent part) that, if for any taxable year the net long-term capital gain exceeds the net short-term capital loss, 50 percent of the amount of such excess shall be a deduction from gross income.

Since the 50-percent deduction provided in section 1202 of the Code is a deduction from gross income and not a decrease in the amount of the gross income, it is further held that, in determining `estimated gross income from farming' for purposes of section 6073(b) of the Code, the entire amount of the gains from the sale of livestock held for draft, breeding or dairy purposes must be taken into account without regard to any deduction allowable under section 1202 of the Code with respect to such gains.