SERVICE EXTENDS SAFE HARBOR VALUES FOR CATTLE FARMERS SUBJECT TO UNIFORM CAPITALIZATION RULES.

Notice 88-113

Notice 88-24, 1988-14 I.R.B. 6, published on April 4, 1988, contains guidance relating to the application of the uniform capitalization rules of section 268A to property produced in the trade or business of farming. In addition, Notice 88-24 provides safe harbor values that are available to certain taxpayers with respect to female cattle produced in a farming business ("beef" or "dairy" cattle).

Under the provisions of Notice 88-24, a taxpayer is permitted to adopt the safe harbor values for beef or dairy cattle provided in Notice 88-24 by amending the taxpayer's Federal income tax return for the taxpayer's first taxable year ending after December 31, 1986, if such amended return is filed on or before October 3, 1988. The purpose of this Notice 88-113 is to advise taxpayers that the date by which an amended return must be filed for purposes of Notice 88-24 has been extended. A taxpayer electing the use of the safe harbor values for beef or dairy cattle provided in Notice 88-24 for the taxpayer's first taxable year ending after December 31, 1986, must effect such election by filing an amended return no later than the due date (determined with regard to extensions) of the taxpayer's income tax return for the taxpayer's second taxable year ending after December 31, 1986. Taxpayers that are permitted to file an amended return for their first taxable year ending after December 31, 1986 for purposes of electing the safe harbor values for beef or dairy cattle under Notice 88-24 are described in Notice 88-24.

Example: Assume that Farmer A, a calendar year individual, is engaged in the business of raising beef cattle to which the uniform capitalization rules of section 263A apply, and that Farmer A makes payments of estimated tax for each taxable year by January 15 of the following year. Assume further that Farmer A is permitted, under the provisions of Notice 88-24, to adopt the safe harbor values provided therein with respect to beef cattle raised in Farmer A's business. Under the provisions of Notice 88-24, as published in the Internal Revenue Bulletin, Farmer A was permitted to elect the safe harbor values for beef cattle by filing an amended Federal income tax return for the taxable year ending December 31, 1987, on or before October 3, 1988. Under this Notice 88-113, Farmer A may elect the safe harbor values for beef cattle by filing an amended Federal income tax return for the taxable year ending December 31, 1987, on or before August 15, 1989 (the due date, with regard to extensions, of Farmer A's income tax return for 1988).

Assume, in contrast, that Farmer A does not make payments of estimated tax for each taxable year by January 15 of the following year. In such a situation, under this Notice 88-113, Farmer A may elect the safe harbor values for beef cattle by filing an amended Federal income tax return for the taxable year ending December 31, 1987, on or before March 1, 1989.

PROCEDURAL INFORMATION

This document serves as an "administrative pronouncement" as that term is described in section 1.6661-3(b)(2) of the Income Tax Regulations and may be relied upon to the same extent as a revenue ruling or revenue procedure.

FURTHER INFORMATION

For further information regarding this notice, contact Paulette C. Galanko at (202) 566-4941 (not a toll-free call).