Commodity Credit Corporation loans

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If a Commodity Credit Corporation (CCC) loan is included in a farmer's gross income under a Sec. 77 election, the crop pledged has a basis equal to the loan. When the crop is sold and the loan repaid, the basis offsets the amount realized from the crop sale. See Reg. 1.1016-5(e). Also, see IRC Sec. Sec. 1016(a)(8) and Rev. Rul. 80-19.

The election is made on line 7a of Schedule F or line 4a of Form 4835 by reporting the loan amount.

A Section 77 election remains in effect unless and until the farmer obtains IRS permission (see Form 3115) to change from that method of accounting.

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