Election to defer Crop Insurance Proceeds to 2012 (Schedule F)

[Dan]

Question 1: If a person receives three checks during 2011 from Crop inurance proceeds (2 checks for wheat and 1 for milo) can you defer to 2012 only the wheat checks?

Question 2: Do you need to include in the deferred amount 2008 and 2009 disaster payments received in 2011. For example, if you defer any 2011 crop insurance proceeds to 2012, must you also defer any 2008 and 2009 disaster payments received?

[DANRVAN]

It’s an all or none deal, unless there are separate farming operations with separate books reported on separate tax forms.

There are some other requirements you need to be aware of. See pub 225 for details.

[Dan]

Instructions to Schedule F (F-4) says in one place, "However, if 2011 was the year of damage, you can elect to include certain proceeds in income for 2012." What does it mean by certain proceeds?

It also says, "...if you elect to defer any eligible crop insurance proceeds, you must defer all such crop insurance proceeds..."

Wheat is one crop and Milo is another crop. It does not say crops. Must you defer all crops (wheat & milo) insurance proceeds if you want to defer any?

Does the statement mean all insurance proceeds of wheat or all the insurance proceeds of both wheat & milo? Looking for an early reply. Thanks!

[DANRVAN]

Sounds like both to me, see (a) (2) below.

Reg §1.451-6. Election to include crop insurance proceeds in gross income in the taxable year following the taxable year of destruction or damage.

Effective: August 26, 1992. Applicable to payments received after December 31, 1973.

(a) In general.

(1) For taxable years ending after December 30, 1969, a taxpayer reporting gross income on the cash receipts and disbursements method of accounting may elect to include insurance proceeds received as a result of the destruction of, or damage to, crops in gross income for the taxable year following the taxable year of the destruction or damage, if the taxpayer establishes that, under the taxpayer's normal business practice, the income from those crops would have been included in gross income for any taxable year following the taxable year of the destruction or damage. However, if the taxpayer receives the insurance proceeds in the taxable year following the taxable year of the destruction or damage, the taxpayer shall include the proceeds in gross income for the taxable year of receipt without having to make an election under section 451(d) and this section. For the purposes of this section only, federal payments received as a result of destruction or damage to crops caused by drought, flood, or any other natural disaster, or the inability to plant crops because of such a natural disaster, shall be treated as insurance proceeds received as a result of destruction or damage to crops. The preceding sentence shall apply to payments that are received by the taxpayer after December 31, 1973.

(2)In the case of a taxpayer who receives insurance proceeds as a result of the destruction of, or damage to, two or more specific crops, if such proceeds may, under section 451(d) and this section, be included in gross income for the taxable year following the taxable year of such destruction or damage, and if such taxpayer makes an election under section 451(d) and this section with respect to any portion of such proceeds, then such election will be deemed to cover all of such proceeds which are attributable to crops representing a single trade or business under section 446(d). A separate election must be made with respect to insurance proceeds attributable to each crop which represents a separate trade or business under section 446(d).