[Code of Federal Regulations]
[Title 7, Volume 10]
[Revised as of January 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1400.601]

[Page 337-338]
 
                          TITLE 7--AGRICULTURE
 
  CHAPTER XIV--COMMODITY CREDIT CORPORATION, DEPARTMENT OF AGRICULTURE
 
PART 1400_PAYMENT LIMITATION AND PAYMENT ELIGIBILITY--Table of Contents
 
           Subpart G_Average Adjusted Gross Income Limitation
 
Sec. 1400.601  Determination of average adjusted gross income.

    (a) For purposes of this subpart, income from farming, ranching or 
forestry operations means income of an individual or entity derived 
from:
    (1) Producing crops, livestock or unfinished raw forestry products;
    (2) Selling (including the sale of easements and development rights) 
their own farm, ranch or forestry land or water rights;
    (3) Selling, but not as a dealer, equipment purchased to conduct 
farm, ranch or forestry operations when the equipment is otherwise 
subject to depreciation expense on the IRS Form 4835 or Schedule F;
    (4) Renting land used for farming, ranching or forestry operations; 
and
    (5) Payments made under any program authorized under chapters VI, 
VII or XIV of this title.
    (b) For purposes of this subpart, except as otherwise provided in 
this subpart, adjusted gross income means:
    (1) For an individual filing a separate tax return, the amount 
reported as ``adjusted gross income'' on the final federal income tax 
return for the individual for the applicable tax year;
    (2) For an individual filing a joint tax return, the amount reported 
as ``adjusted gross income'' on the final federal income tax return for 
the applicable tax year unless a certified statement is provided by a 
certified public accountant or attorney specifying the manner in which 
such income would have been declared and reported if the individuals had 
filed two separate returns and that this calculation is consistent with 
the information actually supporting the filed joint return;
    (3) For a corporation, including a subchapter S corporation, the 
total reported ``taxable income'' as reported to the Internal Revenue 
Service plus the amount of the charitable contributions as reported on 
the final federal income tax return for the applicable tax year;
    (4) For a tax exempt entity, the ``unrelated business taxable 
income'' of the entity as reported to the Internal Revenue Service on 
the final federal income tax return, less any other income CCC 
determines to be from non-commercial activities;
    (5) For a limited liability company, limited partnership, limited 
liability partnership or similar type of organization, the income from 
trade or business activities plus the amount of guaranteed payments to 
the members as reported to the Internal Revenue Service on the final 
federal income tax return for the applicable tax year; and
    (6) For an estate or trust, the adjusted total income plus 
charitable deductions as reported to the Internal Revenue Service on the 
final federal income tax return for the applicable tax year, or the 
amount of net increase in the estate's or trust's value resulting from 
its business or investment interests.

[[Page 338]]

    (c) For purposes of applying this subpart and calculating the three-
year average referenced in Sec. 1400.600, that average shall be for the 
adjusted gross income for the three tax years immediately preceding the 
applicable crop, program or fiscal year, as determined by CCC. For an 
entity that is not required to file a federal income tax return, or an 
individual or entity that did not have taxable income in one or more tax 
years, the average shall be the adjusted gross income, including losses, 
averaged for the three tax years immediately preceding the applicable 
crop, program or fiscal year, as determined by CCC. However, a new 
entity will have its adjusted gross income averaged only for those years 
of the base period for which it was in business, but a new entity shall 
not be considered ``new'' to the extent it takes over an existing 
operation and has any elements of common ownership or interests with the 
preceding entity, or with individuals or entities with an interest in 
the ``old'' entity. When there is such commonality, income of the 
``old'' entity will be averaged with that of the ``new'' entity for the 
base period.

[68 FR 33346, June 4, 2003]