Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 67-2

1967-1 C.B. 13

Sec. 61
Sec. 451
Sec. 1402

IRS Headnote

Where a farmer's income is computed under the cash receipts and disbursements method of accounting, the amount of the credit allowable to the farmer for gasoline used on a farm for farming purposes after June 30, 1965, as provided by section 39 of the Internal Revenue Code of 1954, added by the Excise Tax Reduction Act of 1965, Public Law 89-44, C.B. 1965-2, 568, should be included in his gross income for the year in which the farmer files a timely return on which the credit is taken. Where a farmer is under the accrual method of accounting, the amount of the credit should be included in his gross income for the taxable year in which the gasoline is used. The foregoing conclusions apply both for purposes of determining a farmer's net farm profit or loss and for determining his net earnings from self-employment under either the regular or the optional method.

Full Text

Rev. Rul. 67-2

Advice has been requested concerning the treatment of the amounts payable with respect to gasoline used on a farm for farming purposes which farmers may claim as a credit against their income tax, as provided by the Excise Tax Reduction Act of 1965, Public Law 89-44, C.B. 1965-2, 568, for taxable years beginning after June 30, 1965.

Section 39 of the Internal Revenue Code of 1954, added by section 809 of the Excise Tax Reduction Act, provides, in part, as follows:

There shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the sum of the amounts payable to the taxpayer * * * under section 6420 with respect to gasoline used during the taxable year on a farm for farming purposes * * *.

For this purpose, section 39(b) of the Code provides that a taxpayer's first taxable year beginning after June 30, 1965, shall include the period after that date and before the beginning of such first taxable year. The amount payable to the farmer under section 6420 of the Code is measured by multiplying (1) the number of gallons of gasoline used on his farm for farming purposes by (2) the rate of Federal gasoline tax imposed by section 4081 of the Code which applied on the date he purchased such gasoline. The credit can be allowed only if it is claimed on a timely filed income tax return including any extension of time for filing.

Specifically, advice is requested as to the reporting of the above credit, for income tax purposes, on Schedule F, Schedule of Farm Income and Expenses, and for computing farm net earnings from self-employment under either the regular or optional methods available to farmers for reporting such net earnings.

A farmer whose income is computed on the cash receipts and disbursements method should include the amount of the credit in his gross income for the taxable year in which he files a timely income tax return on which the credit is taken. For example, if the farmer on February 15, 1967, files his income tax return for the calendar year 1966, he may take on that return a gasoline tax credit based on the quantity of gasoline used on his farm for farming purposes during the period July 1, 1965, through December 31, 1966, and the amount of the credit so taken is to be included in his gross income for the calendar year 1967.

A farmer whose income is computed under the accrual method should include the amount of the credit in his gross income for the taxable year in which the gasoline is used. For example, if the farmer using the accrual method files a timely income tax return for the calendar year 1966, he may take on that return a gasoline tax credit based on gasoline used on his farm for farming purposes during the period July 1, 1965 through December 31, 1966. However, the amount of the credit attributable to gasoline used in the period July 1, 1965 through December 31, 1965, should be included in his gross income for 1965; and the amount attributable to the year 1966 should be included in his gross income for 1966.

The conclusions set forth in the two preceding paragraphs are applicable both for the purpose of determining a farmer's net farm profit or loss and for determining his net earnings from self-employment under either the regular or the optional method of determining net earnings from self-employment.