Help with Business Income question. 2nd posting since the first one the link tha

Question

Help with Business Income question. 2nd posting since the first one the link that I was given didn't work

Fred is a cash-basis farmer. During the year, he sold crops that he had raised the previous year in the amount of $120,000. Fred also received crop insurance proceeds this year due to flooding. The crop insurance proceeds were $100,000. Fred also borrowed $30,000 from the Commodity Credit Corporation, pledging grain (in his inventory) as collateral. Fred has not made an election to treat CCC loans as income. Fred wishes to keep his tax bill as low as possible. Compute his gross income from farming, and give a detailed explanation for the treatment of the various items.

Explanation / Answer

Gross income form farming = $120000 + $100000 = $220000

$120000 is farming income as it is received from the sale of crops grown last year.

$100000 is the proceed from crop insurance and are recognized as income in the year of receipt of insurance.

$30000 from the Commodity Credit Corporation.If Fred does not elect to report CCC loans as income, the loans are
not included in income and repayments of the principal are not deductible. (However, interest payments
are a deductible expense.)

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