Tax Type
Income Tax
Description
USDA Peanut Quota Buyout Program Subtraction
Topic
Basis of Tax
Date Issued
04-07-2003
TAX BULLETIN
03-6
Virginia Department of Taxation
IMPORTANT INFORMATION REGARDING
2002 VIRGINIA INCOME TAX RETURNS
USDA PEANUT QUOTA BUYOUT PROGRAM SUBTRACTION
2002 VIRGINIA INCOME TAX RETURNS
USDA PEANUT QUOTA BUYOUT PROGRAM SUBTRACTION
Under emergency legislation passed by the 2003 General Assembly and signed by Governor Warner, any gain recognized as a result of payments from the U.S. Department of Agriculture Peanut Quota Buyout Program may be subtracted, subject to certain restrictions, in determining Virginia taxable income. This notice is intended to provide taxpayers with an update on how to reconcile this legislation on their 2002 Virginia income tax return.
Effective for taxable years beginning on and after January 1, 2002, an individual and corporate income tax subtraction is available for any gain recognized as a result of payments from the U.S. Department of Agriculture Peanut Quota Buyout Program. To determine the proper gain to be recognized on the federal return, see Internal Revenue Service Notice 2002-67 (included in Internal Revenue Bulletin 2002-42) or contact a tax professional. The notice and bulletin are available on the Internal Revenue Service’s website, http://www.irs.gov.
The subtraction may apply in one of two different ways depending on the structure of payments chosen by the peanut quota holder. Under the U.S. Department of Agriculture Peanut Quota Buyout Program, peanut quota holders may choose to receive their buyout in either five equal payments over five years or in one lump sum payment. Peanut quota holders who choose to receive their buyout in five equal payments over five years may subtract all of the gain recognized on their federal return in each year in which they receive an installment payment.
Peanut quota holders who choose to receive their buyout in one lump sum payment may subtract 20% of the gain recognized on their federal return in the year in which they receive the lump sum payment. In each of the next four succeeding taxable years, peanut quota holders who choose to receive their buyout in one lump sum payment may deduct an amount equal to the initial subtraction.
Taxpayers Who Have Not Yet Filed
Individuals
Individuals who have recognized a gain on their federal return as a result of a peanut quota buyout payment, and are eligible for a subtraction as described above, should claim this subtraction as an Other subtraction with Code 99 on Lines 6b-6d of Schedule ADJ for Form 760. In addition, the Department recommends that individuals claiming a subtraction attach a brief explanation to their income tax return indicating that they recognized a gain from a peanut quota buyout payment, the amount of such gain, and whether they received the payment in one lump sum payment or in five equal payments over five years. Attaching this explanation will allow the income tax return to be processed more efficiently.
Part-year residents and nonresidents who have recognized a gain from a peanut quota buyout payment and are eligible for the subtraction should also claim this subtraction as an Other subtraction. Part-year residents may claim this subtraction with Code 99 on Lines 44a-44c of Form 760PY. Nonresidents may claim this subtraction with Code 99 on Lines 39a-39c of Form 763. As with resident individuals, the Department recommends that all individuals claiming this subtraction attach a brief explanation to their income tax return indicating that they recognized a gain from a peanut quota buyout payment, the amount of such gain, and whether they received the payment in one lump sum payment or in five equal payments over five years. Attaching this explanation will allow the income tax return to be processed more efficiently.
Corporations
Corporate taxpayers that have recognized a gain from a peanut quota buyout payment on their federal return and are eligible for the subtraction should claim this subtraction as an Other subtraction on Line 36 of Part II of Form 500. In addition, the Department recommends that taxpayers claiming this subtraction attach a brief explanation to their income tax return indicating that they recognized a gain from a peanut quota buyout payment, the amount of such gain, and whether they received the payment in one lump sum payment or in five equal payments over five years. Attaching this explanation will allow the income tax return to be processed more efficiently.
Taxpayers Who Have Already Filed
Individuals
Individuals who have already filed a 2002 individual income tax return and are eligible for the subtraction should file an amended 2002 Virginia individual income tax return. For Virginia residents, instructions for filing an amended return are found on Page 21 of the Form 760 Instructions. Please remember to fill in the oval at the top of Page 1 to indicate that the return is an amended return. Taxpayers should completely fill out the form and claim the subtraction as described above.
For nonresidents, instructions for filing an amended return are found on page 18 of the Form 763 Instructions. Instructions for part-year residents filing an amended return are found on page 22 of the Form 760PY Instructions.
Corporations
Corporations that have already filed a 2002 corporation income tax return and are eligible for the subtraction should file an amended 2002 Virginia corporation income tax return. Amended corporation income tax returns are filed using Form 500X, the Amended Virginia Corporation Income Tax Return. Corporation income taxpayers should follow the instructions for Form 500X and claim the subtraction as a change in Net Virginia Modifications on Line 2, Column B.
If you have any additional questions, please contact us at (804) 367-8031 for individual income tax questions or (804) 367-8037 for corporate income tax questions.
Rulings of the Tax Commissioner