Page:United States Statutes at Large Volume 100 Part 3.djvu/415

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2223

SEC. 404. LIMITATION ON CERTAIN PREPAID FARMING EXPENSES.

(a) GENERAL RULE.—Section 464 (relating to limitations on deductions in case of farming syndicates) is amended by adding at the end thereof the following new subsection: "(f) SUBSECTIONS (a) AND (b) To APPLY TO CERTAIN PERSONS PREPAYING 50 PERCENT OR MORE OF CERTAIN FARMING EXPENSES.—

"(1) IN GENERAL.—In the case of a taxpayer to whom this subsection applies, subsections (a) and O> shall apply to the t) excess prepaid farm supplies of such taxpayer in the same manner as if such taxpayer were a farming syndicate. "(2) TAXPAYER TO WHOM SUBSECTION APPLIES.—This subsection applies to any taxpayer for any taxable year if such taxpayer— "(A) does not use an accrual method of accounting, "(B) has excess prepaid farm supplies for the taxable year, and "(C) is not a qualified farm-related taxpayer. "(3) QUALIFIED FARM-RELATED TAXPAYER.—

' '•''

'

'

'•'

" y' ' sj-

"(A) IN GENERAL.—For purposes of this subsection, the term 'qualified farm-related taxpayer' means any farmrelated taxpayer if— "(i)(I) the aggregate prepaid farm supplies for the 3 taxable years preceding the taxable year are less than 50 percent of, "(II) the aggregate deductible farming expenses (other than prepaid farm supplies) for such 3 taxable years, or "(ii) the taxpayer has excess prepaid farm supplies for the taxable year by reason of any change in business operation directly attributable to extraordinary circumstances. "(B) FARM-RELATED TAXPAYER.—For purposes of this paragraph, the term 'farm-related taxpayer' means any taxpayer— "(i) whose principal residence (within the meaning of section 1034) is on a farm, "(ii) who has a principal occupation of farming, or "(iii) who is a member of the family (within the meaning of subsection (c)(2)(E)) of a taxpayer described in clause (i) or (ii). "(4) DEFINITIONS.—For purposes of this subsection— "(A) EXCESS PREPAID FARM SUPPLIES.—The term 'excess prepaid farm supplies' means the prepaid farm supplies for the taxable year to the extent the amount of such supplies exceeds 50 percent of the deductible farming expenses for the taxable year (other than prepaid farm supplies). "(B) PREPAID FARM SUPPLIES.—The term 'prepaid farm supplies' means any amounts which are described in subsection (a) or (b) and would be allowable for a subsequent taxable year under the rules of subsections (a) and (b). "(C) DEDUCTIBLE FARMING EXPENSES.—The term 'deductible farming expenses' means any amount allowable as a deduction under this chapter (including any amount allowable as a deduction for depreciation or amortization) which is properly allocable to the trade or business of farming."

(b) CONFORMING AMENDMENTS.—

�