26 U.S.C. § 447: Method of accounting for corporations engaged in farming

a corporation engaged in the trade or business of farming, or a partnership engaged in the trade or business of farming, if a corporation is a partner in such partnership, For rules requiring capitalization of certain preproductive period expenses, see section 263A. an S corporation, or a corporation which meets the gross receipts test of section 448(c) for such taxable year. Any change in method of accounting made pursuant to this section shall be treated for purposes of section 481 as initiated by the taxpayer and made with the consent of the Secretary. for its 10 taxable years ending with its first taxable year beginning after December 31, 1975 , a corporation or qualified partnership used an annual accrual method of accounting with respect to its trade or business of farming, such corporation or qualified partnership raises crops which are harvested not less than 12 months after planting, and such corporation or qualified partnership has used such method of accounting for all taxable years intervening between its first taxable year beginning after December 31, 1975 , and the taxable year, For purposes of paragraph (1), the term “annual accrual method of accounting” means a method under which revenues, costs, and expenses are computed on an accrual method of accounting and the preproductive period expenses incurred during the taxable year are charged to harvested crops or deducted in determining the taxable income for such years. a corporation acquired substantially all the assets of a qualified farming trade or business from another corporation in a transaction in which no gain or loss was recognized to the transferor or transferee corporation, or a qualified partnership acquired substantially all the assets of a qualified farming trade or business from one of its partners in a transaction to which section 721 applies, an S corporation, or a personal holding company (within the meaning of section 542(a)). sugar cane, any plant with a preproductive period (as defined in section 263A(e)(3)) of 2 years or less, and any other plant (other than any citrus or almond tree) if an election by the corporation under this subparagraph is in effect. For purposes of paragraphs (1) and (2) of section 263A(e), any election under this subparagraph shall be treated as if it were an election under subsection (d)(3) of section 263A. Unless the Secretary otherwise consents, an election under this subparagraph may be made only for the corporation’s 1st taxable year which begins after December 31, 1986 , and during which the corporation engages in a farming business. Any such election, once made, may be revoked only with the consent of the Secretary. Except as provided in subparagraph (B), the amendments made by paragraph (1) [enacting this section] shall apply to taxable years beginning after December 31, 1976 . members of two families (within the meaning of paragraph (1) of [former] section 447(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], as added by paragraph (1)) owned, on October 4, 1976 (directly or through the application of such [former] section 447(d)), at least 65 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, and at least 65 percent of the total number of shares of all other classes of stock of such corporation; or by employees of the corporation or members of the families (within the meaning of section 267(c)(4) of such Code) of such employees, or by a trust for the benefit of the employees of such corporation which is described in section 401(a) of such Code and which is exempt from taxation under section 501(a) of such Code, is a farmer, nurseryman, or florist, is on an accrual method of accounting, and is not required by section 447 of the Internal Revenue Code of 1954 to capitalize preproductive period expenses. A taxpayer to whom this section applies may not be required to inventory growing crops for any taxable year beginning after December 31, 1977 . A taxpayer to whom this section applies may, for any taxable year beginning after December 31, 1977 and before January 1, 1981 , change to the cash receipts and disbursements method of accounting with respect to any trade or business in which the principal activity is growing crops. shall not require the consent of the Secretary of the Treasury or his delegate, and shall be treated, for purposes of section 481 of the Internal Revenue Code of 1954 as a change in the method of accounting initiated by the taxpayer. For purposes of this section, the term ‘Growing crops’ does not include trees grown for lumber, pulp, or other nonlife purposes.” a farming syndicate (within the meaning of [former] section 464(c) of the Internal Revenue Code of 1954 [now 26 U.S.C. 461(k) ]) was in existence on December 31, 1975 , and such syndicate elects an accrual method of accounting (including the capitalization of preproductive period expenses described in section 447(b) of such Code) for a taxable year beginning before January 1, 1979 , a corporation has computed its taxable income on an annual accrual method of accounting together with a static value method of accounting for deferred costs of growing crops for the 10 taxable years ending with its first taxable year beginning after December 31, 1975 , such corporation raises crops which are harvested not less than 12 months after planting, and such corporation elects, within one year after the date of the enactment of this Act [ Oct. 4, 1976 ] and in such manner as the Secretary of the Treasury or his delegate prescribes, to change to the annual accrual method of accounting (within the meaning of section 447(g)(2) [now section 447(e)(2)] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) for taxable years beginning after December 31, 1976 , A corporation which elects under subparagraph (A) to change to the annual accrual method of accounting shall, for purposes of section 447(g) [now section 447(e)] of the Internal Revenue Code of 1986, be deemed to be a corporation which has computed its taxable income on an annual accrual method of accounting for its 10 taxable years ending with its first taxable year beginning after December 31, 1975 . For purposes of this paragraph, if a corporation acquired substantially all the assets of a farming trade or business from another corporation in a transaction in which no gain or loss was recognized to the transferor or transferee corporation, the transferee corporation shall be deemed to have computed its taxable income on an annual accrual method of accounting together with a static value method of accounting for deferred costs of growing crops during the period for which the transferor corporation computed its taxable income from such trade or business on such accrual and static value method.”