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Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

Question

How does UltraTax CS optimize the elected farm income?

Answer

UltraTax CS uses the calculated taxable income attributable to farming/fishing to optimize elected farm income when all of the Elected farm income fields are blank. If any of the Elected farm income fields contain data, UltraTax CS will only use the Elected farm income fields to complete Schedule J. UltraTax CS performs multiple computations to determine the optimal elected farm income based upon the current and base year's tax brackets and taxable income. Ordinary income (including any short-term capital gains) will be optimized before net capital gains. Net capital gains are defined as the excess, if any, of net long-term capital gains over short-term capital losses. Net capital gains will be displayed in the shaded Net capital gain fields on Screen J.

Optimized elected farm income will not exceed the lower of taxable income reported on the return or the amount calculated by UltraTax CS for total taxable income attributable to farming/fishing. See Schedule J Farm Income Averaging Worksheet 1 for the application-calculated "Taxable income from Farming or Fishing." Optimized elected net capital gain will be limited to the smaller of the total net capital gain reported on the return or the net capital gain attributable to farming/fishing. The Schedule J Farm Income Averaging Worksheet 1 will report the amounts used to calculate tax for the applicable year using the maximum capital gains rates. To report the amounts entered on the Elected farm income fields without optimization, enter X in the Income averaging (Force) field.

Related topic: Schedule J FAQs (1040)

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