Rev. Rul. 55-611
An association which purchases supplies and equipment for its members who are fishermen is not a farmers' purchasing association within the meaning of section 521(b)(1) of the Internal Revenue Code of 1954 and, therefore, is not exempt from Federal income tax under such section.
Rev. Rul. 64-246
An association organized and operated on a cooperative basis for the purpose of marketing "farm-raised fish" is considered an organization composed of producers of farm products. Accordingly, the organization is held to be entitled to exemption from Federal income tax as a farmers', fruit growers', or like association within the meaning of section 521 of the Internal Revenue Code of 1954.
Revenue Ruling 55-611, C.B. 1955-2, 270, distinguished.
. ***Rev. Rul. 76-241
The Internal Revenue Service has been asked to reconsider its position set forth in I.T. 2704, XII-2 C.B. 169 (1933).
I.T. 2704 provides as follows:
In view of General Counsel's Memorandum 12004 (page 168, this Bulletin), Office Decision 684 (C.B. 3, 80) is amended to read as follows:
The net income of a person engaged in the business of propagation and culture of oysters cannot be properly computed upon the basis of inventories. The net income of such a taxpayer is the amount of the gross sales of oysters plus all other items of gross income less allowable deductions, to be reported on the cash receipts and disbursements basis or the accrual basis in accordance with the method of accounting used by the taxpayer in keeping its books and in filing its returns.
Prior to the publication of I.T. 2704, the Service's position with respect to the income of oyster growers was published in O.D. 684, 3 C.B. 80 (1920), which held that the net income of persons engaged in the business of propagation and culture of oysters cannot be properly computed on the basis of inventories. The net income is the gross receipts for the year less the necessary business expenses and other allowable deductions.
Although the Service stated in I.T. 2704 that persons engaged in the cultivation of oysters cannot inventory oysters for purposes of computing income for Federal income tax purposes, it has been determined by the Service that growing oysters are capable of being inventoried.
Accordingly, the taxpayers in Example 1, Example 2, and Example 3, must inventory oysters and seed oysters unless the crop method is used. The inventory may be determined under the farm-price method as provided for by section 1.471-6(c) of the regulations. Adequate accounting records must be maintained to permit proper determination and verification of such inventories.
Section 1.6073-1(b) of the Income Tax Regulations provides that estimated gross income from farming is the estimated income from oyster farming, the cultivation of the soil, the raising or harvesting of any agricultural or horticultural commodities and the raising of livestock, bees, or poultry. The regulation also provides that the requisite gross income from farming must be derived from the operations of a stock, dairy, poultry, fruit, or truck farm, or plantation, ranch, nursery, range, orchard, or oyster bed. If an individual receives for the use of the land income in the form of a share of the crops produced thereon, such income is from farming.
AnitaL wrote:Thanks for your help... I can't see why it would make much of a difference if it was reported on a schedule C vs a schedule F in this case. But, maybe I'm missing something.
CaptCook wrote:AnitaL wrote:Thanks for your help... I can't see why it would make much of a difference if it was reported on a schedule C vs a schedule F in this case. But, maybe I'm missing something.
The availability of income averaging might be one reason.