Discussion:CCC loan repayment deductibility

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Discussion Forum Index --> Tax Questions --> CCC loan repayment deductibility


FrankF (talk|edits) said:

2007-03-18
What is the rule for when Commodity Credit Corporation (CCC) loan repayments are deductible as an expense against gross farm income?

I have looked (to no avail) at the publications and research services for a statement of the rule. Any little push in the right direction will be appreciated.

Riley2 (talk|edits) said:

19 March 2007
Technically, the loan proceeds are added to the basis of the crop, thus reducing the amount realized when the crop is sold and the loan repaid. See Reg. 1.1016-5(e). Also, see IRC Sec. Sec. 1016(a)(8) and Rev. Rul. 80-19.

FrankF (talk|edits) said:

19 March 2007
Thanks, Riley2, I was finding extension publications, etc., along those lines, but nothing 'official.' That helped a lot.

WillyB (talk|edits) said:

19 March 2007
These item all assume the loan was take into income under a Sec. 77 election. Otherwise they are not applicable. The Section 77 election is a bit of a rare bird. I have seen it used... but seldom.

Dennis (talk|edits) said:

19 March 2007
That makes a lot more sense. I was wondering how it could get into basis.

FrankF (talk|edits) said:

19 March 2007
It appears to me, then, that if the client now wants to show the basis by 'expensing' the loan repayment, the client should have shown the loan on line 7a of Schedule F in the year of receipt. (Thus, if there is no such entry on past returns, I need to run for cover.)

WillyB (talk|edits) said:

19 March 2007
That is correct FrankF. A Section 77 election remains in effect, once made, until TP gets permission from IRS (I would expect via form 3115 filing) to change from that method of accounting. You need to see if TP has been accounting for CCC loans under the Sec. 77 election.

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