Farming - income averaging
16/01/1989
Query
Qualification for income averaging - (i) losses incured (ii)commencement of farming in partnership
Decision
(i) the fact that a farmer incurs a loss while on income averaging does not affect his entitlement to be on income averaging (ii) Where a farmer trading as a sole trader on income averaging starts trading as a partner, Revenue would be prepared to allow income averaging to continue for existing farming activities; once the partnership trade had been in existence for sufficiently long to be assessed for two years in accordance with section 65(1) TCA 1997, the farmer could opt for averaging in respect of this trade
Income Tax
Section 657, Taxes Consolidation Act, 1997
Origin: RLS Division
File ref:892000
04/09/1997
Query
A father and son farm in partnership. If the father decides to retire and the son continues to farm as a sole trader, is the son entitled to continue on income averaging. What review procedure applies in these circumstances?.
Decision
The cessation of a partnership trade and the commencement of a sole trade will not affect an individual’s entitlement to income averaging. Section 657(6)(a) Taxes Consolidation Act 1997 provides that once an individual elects for income averaging he is charged to tax for each year of assessment in respect of profits based on a 3 year average. He will continue to be charged in this manner until either of the following applies: (a) he is an individual to whom subsection (1) applies, in which case he is deemed to elect to opt out of averaging (b) he is not chargeable to tax on farming profits (c) he elects to opt out of averaging (d) he is deemed to elect to opt out of averaging. This only applies in the case of (a). A review, for the purposes of section 657(8)(b), will therefore not be required in these circumstances as the individual has not elected or deemed to have elected out of averaging. A review will however be necessary under Section 67 Taxes Consolidation Act 1997 of both the father’s and son’s assessments.
Income Tax
Section 657, Taxes Consolidation Act, 1997
Origin: RLS Division
File ref:IT973010