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Old 02-06-2017, 09:53 PM
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Reporting 2017 Income in 2016?

I have a farmer who insists he was told he could report income from early 2017 on his 2016 tax return. He sold all his crop at once, arranging to have it shipped in late December. Unfortunately, there were issues with the trucks and most of the crop ended up being shipped in January. The agency purchasing the grain paid for all of it in January.

So he actually received the money in January 2017, but he had intended to make sure the transaction took place fully within 2016. It was not his fault the agency had truck trouble, and this is going to cause him a tax problem in 2017. His plan was to buy a big grain truck and expense the whole thing in 2016 to offset the income from the grain.

He did buy the truck, assuming there would be no problem with his plan. He can't expense it if he can't recognize the income, because, without that income, he has a loss for the year. And now he has no big expense for 2017 to net against the large income that was unfortunately shunted over to 2017.

I can't find any justification whatsoever for reporting income in 2016 that he received in January 2017. Does anyone know of any way to justify reporting the income in 2016? I spent awhile arguing with him about this, and I'd like to be able to tell him I left no stone unturned in trying to find a solution for him. He is using cash accounting, not accrual. The agency buying the crop may be operating on an accrual basis, but they didn't calculate the sale and write the check until 2017, plus most of the grain was not actually shipped until 2017.

Thanks,
Vicki



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Old 02-09-2017, 11:57 PM
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Location: Houston, Texas
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Why can't he just generate a NOL carryover and forego the carryback?



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Old 02-10-2017, 10:44 AM
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Re: Reporting 2017 Income in 2016?

Quote:
Originally Posted by Houston Tax Attorney View Post
Why can't he just generate a NOL carryover and forego the carryback?
Ummm, he can. I was so focused on dealing with his persistent insistence that he could recognize his 2017 grain sales in 2016, I failed to think of anything else. Thanks! And ... duh!



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