26 U.S.C. § 1301

Averaging of farm income

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(a) In generalAt the election of an individual engaged in a farming business or fishing business, the tax imposed by section 1 for such taxable year shall be equal to the sum of—(1) a tax computed under such section on taxable income reduced by elected farm income, plus(2) the increase in tax imposed by section 1 which would result if taxable income for each of the 3 prior taxable years were increased by an amount equal to one-third of the elected farm income.Any adjustment under this section for any taxable year shall be taken into account in applying this section for any subsequent taxable year.(b) DefinitionsIn this section—(1) Elected farm income(A) In generalThe term “elected farm income” means so much of the taxable income for the taxable year—(i) which is attributable to any farming business or fishing business; and(ii) which is specified in the election under subsection (a).(B) Treatment of gains

For purposes of subparagraph (A), gain from the sale or other disposition of property (other than land) regularly used by the taxpayer in such a farming business or fishing business for a substantial period shall be treated as attributable to such a farming business or fishing business.

(2) Individual

The term “individual” shall not include any estate or trust.

(3) Farming business

The term “farming business” has the meaning given such term by section 263A(e)(4).

(4) Fishing business

The term “fishing business” means the conduct of commercial fishing as defined in section 3 of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1802).

(c) RegulationsThe Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this section, including regulations regarding—(1) the order and manner in which items of income, gain, deduction, or loss, or limitations on tax, shall be taken into account in computing the tax imposed by this chapter on the income of any taxpayer to whom this section applies for any taxable year, and(2) the treatment of any short taxable year.(Added Pub. L. 105–34, title IX, § 933(a), Aug. 5, 1997, 111 Stat. 881; amended Pub. L. 108–357, title III, § 314(b), Oct. 22, 2004, 118 Stat. 1468.)Editorial NotesPrior Provisions

A prior section 1301, added Pub. L. 88–272, title II, § 232(a), Feb. 26, 1964, 78 Stat. 106; amended Pub. L. 91–172, title III, § 311(a), Dec. 30, 1969, 83 Stat. 586; Pub. L. 98–369, div. A, title I, § 173(b), (c)(1), July 18, 1984, 98 Stat. 704, placed a limit on the tax attributable to averagable income, prior to repeal by Pub. L. 99–514, title I, §§ 141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.

Another prior section 1301, act Aug. 16, 1954, ch. 736, 68A Stat. 334, related to compensation from an employment, defined “an employment”, and stated the rule with respect to partners, prior to the general revision of this part by Pub. L. 88–272.

A prior section 1302, added Pub. L. 88–272, title II, § 232(a), Feb. 26, 1964, 78 Stat. 106; amended Pub. L. 91–172, title III, § 311(b), Dec. 30, 1969, 83 Stat. 586; Pub. L. 94–455, title VII, § 701(f)(1), Oct. 4, 1976, 90 Stat. 1580; Pub. L. 95–30, title I, § 102(b)(15), May 23, 1977, 91 Stat. 138; Pub. L. 95–600, title I, § 101(d)(2), Nov. 6, 1978, 92 Stat. 2770; Pub. L. 95–615, § 202(g)(5), formerly § 202(f)(5), Nov. 8, 1978, 92 Stat. 3100, renumbered Pub. L. 96–222, title I, § 108(a)(1)(A), Apr. 1, 1980, 94 Stat. 223; Pub. L. 97–34, title I, § 111(b)(3), Aug. 13, 1981, 95 Stat. 194; Pub. L. 97–248, title II, § 265(b)(2)(B), Sept. 3, 1982, 96 Stat. 547; Pub. L. 98–369, div. A, title I, § 173(a), (c)(2)–(4), July 18, 1984, 98 Stat. 703, 704, defined “averagable income” and other terms related to income averaging, prior to repeal by Pub. L. 99–514, title I, §§ 141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.

Another prior section 1302, act Aug. 16, 1964, ch. 736, 68A Stat. 335, related to income from an invention or artistic work, prior to the general revision of this part by Pub. L. 88–272.

A prior section 1303, added Pub. L. 88–272, title II, § 232(a), Feb. 26, 1964, 78 Stat. 107; amended Pub. L. 91–172, title III, § 311(d)(1), Dec. 30, 1969, 83 Stat. 587; Pub. L. 94–455, title XIX, § 1901(b)(8)(G), Oct. 4, 1976, 90 Stat. 1795; Pub. L. 97–34, title I, § 111(b)(4), Aug. 13, 1981, 95 Stat. 194; Pub. L. 99–272, title XIII, § 13206(a), (b), Apr. 7, 1986, 100 Stat. 318, 319, related to individuals eligible for income averaging, prior to repeal by Pub. L. 99–514, title I, §§ 141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.

Another prior section 1303, acts Aug. 16, 1954, ch. 736, 68A Stat. 335, Sept. 22, 1961, Pub. L. 87–293, title II, § 201(b), 75 Stat. 625, related to income from back pay, prior to the general revision of this part by Pub. L. 88–272.

A prior section 1304, added Pub. L. 88–272, title II, § 232(a), Feb. 26, 1964, 78 Stat. 108; amended Pub. L. 91–172, title III, § 311(c), (d)(2), title V, § 515(c)(4), title VIII, §§ 802(c)(5), 803(d)(8), Dec. 30, 1969, 83 Stat. 587, 646, 678, 684; Pub. L. 93–406, title II, § 2005(c)(6), Sept. 2, 1974, 88 Stat. 991; Pub. L. 94–455, title III, § 302(c), title V, § 501(b)(7), title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1555, 1559, 1834; Pub. L. 95–600, title IV, § 401(b)(5), Nov. 6, 1978, 92 Stat. 2867; Pub. L. 95–615, § 202(g)(5), formerly § 202(f)(5), Nov. 8, 1978, 92 Stat. 3100, renumbered Pub. L. 96–222, title I, § 108(a)(1)(A), Apr. 1, 1980, 94 Stat. 223; Pub. L. 97–34, title I, §§ 101(c)(2)(B), 111(b)(3), (4), Aug. 13, 1981, 95 Stat. 183, 194; Pub. L. 97–248, title II, § 265(b)(2)(C), Sept. 3, 1982, 96 Stat. 547, set out special rules for income averaging, prior to repeal by Pub. L. 99–514, title I, §§ 141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.

Another prior section 1304, act Aug. 11, 1955, ch. 804, § 1(a), 69 Stat. 688, related to compensatory damages for patent infringement, prior to the general revision of this part by Pub. L. 88–272.

A prior section 1305, added Pub. L. 88–272, title II, § 232(a), Feb. 26, 1964, 78 Stat. 110; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834, provided for promulgation of regulations for income averaging, prior to repeal by Pub. L. 99–514, title I, §§ 141(a), 151(a), Oct. 22, 1986, 100 Stat. 2117, 2121, effective Dec. 31, 1986.

Another prior section 1305, act Aug. 26, 1957, Pub. L. 85–165, § 1, 71 Stat. 413, related to damages for breach of contract or fiduciary duty, prior to the general revision of this part by Pub. L. 88–272.

A prior section 1306, Pub. L. 85–866, title I, § 58(a), Sept. 2, 1958, 72 Stat. 1646, related to damages received for injuries under the antitrust laws, prior to the general revision of this part by Pub. L. 88–272.

A prior section 1307, act Aug. 16, 1954, ch. 736, 68A Stat. 336, § 1307, formerly § 1304; renumbered § 1305, Aug. 11, 1955, ch. 804, § 1(a), 69 Stat. 688; renumbered § 1306, Aug. 26, 1957, Pub. L. 85–165, § 1, 71 Stat. 413; renumbered § 1307, Sept. 2, 1958, Pub. L. 85–866, title I, § 58(a), 72 Stat. 1646; amended Oct. 16, 1962, Pub. L. 87–834, § 22(a), 76 Stat. 1064, provided rules applicable to this part, prior to the general revision of this part by Pub. L. 88–272.

Amendments

2004—Subsec. (a). Pub. L. 108–357, § 314(b)(1), substituted “farming business or fishing business” for “farming business” in introductory provisions.

Subsec. (b)(1)(A)(i), (B). Pub. L. 108–357, § 314(b)(2), inserted “or fishing business” after “farming business” wherever appearing.

Subsec. (b)(4). Pub. L. 108–357, § 314(b)(3), added par. (4).

Statutory Notes and Related SubsidiariesEffective Date of 2004 Amendment

Amendment by Pub. L. 108–357 applicable to taxable years beginning after Dec. 31, 2003, see section 314(c) of Pub. L. 108–357, set out as an Effective and Termination Dates of 2004 Amendments note under section 55 of this title.

Effective Date

Pub. L. 105–34, title IX, § 933(c), Aug. 5, 1997, 111 Stat. 882, as amended by Pub. L. 105–277, div. J, title II, § 2011, Oct. 21, 1998, 112 Stat. 2681–902, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1997.”

Notes of Decisions

Cited in 14 cases, 1960–2013 · leading case: Combs v. United States, 490 F. Supp. 19 (E.D. Ky. 1978).

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Combs v. United States, 490 F. Supp. 19 (E.D. Ky. 1978). · cites it 3× “On November 17, 1977, after trial and a verdict for- the Government, the plaintiff filed a motion for leave to file an amendment to his complaint whereby he would elect to compute the amount of taxes due pursuant to 26 U.S.C. § 1301 et seq. These provisions allow an eligible…”

Anne Moen Bullitt Biddle Brewster v. Comm'r of Internal Revenue, 607 F.2d 1369 (D.C. Cir. 1979). “In the case of a taxpayer engaged in a trade or business in which both personal services and capital are material income-producing factors, under regulations prescribed by the Secretary, a reasonable allowance as compensation for the personal services rendered by the taxpayer,…”

Tucker v. United States, 8 Cl. Ct. 575 (Ct. Cl. 1985). “Regarding the 1979 tax year, plaintiff has introduced no prior year returns or other documentary evidence to support his entitlement to income averaging under 26 U.S.C. § 1301 (1976). At the trial, the plaintiff stipulated that (1) during the taxable years 1965 through 1978, his…”

Beckman v. United States, 396 F. Supp. 44 (D. Kan. 1975). · cites it 3× “( 26 U.S.C.A. § 1301 et seq.) This schedule listed taxable income for pertinent years as follows: 1969 $13,426.”

Prizer v. United States, 11 Cl. Ct. 184 (Ct. Cl. 1986). “See 26 U.S.C. § 1301 (1982). . The Morse and Lakovich cases give plaintiffs no comfort because our close reading of those cases discloses that they are clearly factually distinguishable.”

Maurice J. Breen & Alyce J. Breen v. Comm'r of Internal Revenue, 328 F.2d 58 (8th Cir. 1964). “Whether the taxpayer was entitled, with respect to a $4,200 fee received in 1955, to the benefit of the spreading provisions of § 1301 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 1301 . 2. Whether gains the taxpayer realized in 1955 and 1956 on two trustee’s certificates…”

Pfotzer v. United States, 396 F. Supp. 961 (D. Del. 1975). · cites it 3× “ed on each of the plaintiffs’ individual 1963 tax returns and this is the reason why the returns reflect a loss in 1963; (5) that in 1963 the partners in fact received income from the partnership; (6) that this income is somehow reflected in a 1963 schedule attached to the…”

Ralph B. Wattley & Josephine R. Wattley v. Comm'r of Internal Revenue, 275 F.2d 461 (2d Cir. 1960). “It is a fact, which the government does not discuss in its brief, that though the present case is covered by § 107(a), this alleviating provision was revised somewhat in phraseology in § 1301 of the Internal Revenue Code of 1954, 26 U.”

Wilson v. United States, 322 F. Supp. 830 (D. Kan. 1971). “*834 It is ordered that the defendant’s motion for partial summary judgment be granted to the extent that plaintiff attempted to utilize the income averaging provisions of the Internal Revenue Code, 26 U.S.C.A. § 1301 et seq.; and It is further ordered that defendant’s motion…”

Combs v. United States, 490 F. Supp. 22 (E.D. Ky. 1978). “On November 17, 1977, the plaintiff filed a motion for leave to file an amendment to his complaint whereby he would elect to compute the amount of taxes due pursuant to 26 U.S.C. § 1301 et seq. and this motion was sustained by court order dated September 7, 1978.”

Miskovsky v. United States, 290 F. Supp. 403 (W.D. Pa. 1968). “26 U.S.C. § 1301 et seq. Another illustration of departure from annual computation is the “net operating loss carryback” provision of 26 U.”

Dorsey v. United States Sec'y of Agric., 2008 CIT 32 (Ct. Intl. Trade 2008). “, 26 U.S.C. § 1301 ), yet, in contrast to such rigidity, the appellate decision actually observed that FAS’s regulations are not “impermissibly rigid” and that they did not lead to legal error in the context of that case; further, it stated that “this is not a case in which…”

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