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TITLE 26-INTERNAL REVENUE CODE (D) Nonfarm adjusted gross income For purposes of this section, the term "nonfarm adjusted gross income" means ad- justed gross income (taxable income, in the case of an electing small business corpora- tion) computed without regard to income or deductions attributable to the business of farming. (E) Termination of additions No amount shall be added to the excess deductions account for any taxable year be- ginning after December 31, 1975. (3) Subtractions from account If there is any amount in the excess deduc- tions account at the close of any taxable year (determined before any amount is subtracted under this paragraph for such year) there shall be subtracted from the account- (A) an amount equal to the farm net income for such year, plus the amount (de- termined as provided in regulations pre- scribed by the Secretary) necessary to adjust the account for deductions which did not result in a reduction of the taxpayer's tax under this subtitle for the taxable year or any preceding taxable year, and (B) after applying paragraph (2) of sub- paragraph (A) of this paragraph (as the case may be), an amount equal to the sum of the amounts treated, solely by reason of the application of subsection (c), as ordi- nary income. In the case of a corporation which has made or received a transfer described in clause (ii) of paragraph (5)(A), subtractions from the excess deductions account shall be deter- mined, in such manner as the Secretary shall prescribe, applying this paragraph to the farm net income, and the amounts described in subparagraph (B), of the transferor corpo- ration and the transferee corporation on an aggregate basis. (4) Exception for taxpayers using certain account- ing methods (A) General rule Except to the extent that the taxpayer has succeeded to an excess deductions ac- count as provided in paragraph (5), addi- tions to the excess deductions account shall not be required by a taxpayer who elects to compute taxable income from farming (I) by using inventories, and (ii) by charging to capital account all expenditures paid or in- curred which are property chargeable to capital account (including such expendi- tures which the taxpayer may, under this chapter or regulations prescribed thereun- der, otherwise treat or elect to treat as ex- penditures which are not chargeable to cap- Ital account). (B) Time, manner, and effect of election An election under subparagraph (A) for any taxable year shall be filed within the time prescribed by law (including exten- sions thereof) for filing the return for such taxable year, and shall be made and filed in such manner as the Secretary shall pre- scribe by regulations. Such election shall be binding on the taxpayer for such taxable year and for all subsequent taxable years and may not be revoked except with the consent of the Secretary. (C) Change of method of accounting, etc. If, in order to comply with the election made under subparagraph (A), a taxpayer changes his method of accounting in com- puting taxable income from the business of farming, such change shall be treated as having been made with the consent of the Secretary and for purposes of section 481(a)(2) shall be treated as a change not initiated by the taxpayer. (5) Transfer of account (A) Certain corporate transactions (I) In the case of a transfer described in subsection (d)(3) to which section 371(a), 374(a), or 381 applies, the acquiring corpo- ration shall succeed to and take into ac- count as of the close of the day of distri- bution or transfer, the excess deductions account of the transferor. (ii) In the case of a transfer which is de- scribed in subsection (d)(3), which is in connection with a reorganization de- scribed in section 368(a)(1)(D), and which is not described in clause (1), the transfer- ee corporation shall be deemed to have an excess deductions account in an amount equal to the amount in the excess deduc- tions account of the transferor. The transferor's excess deductions account shall not be reduced by reason of the pre- ceding sentence. (B) Certain gifts If- (i) farm recapture property is disposed of by gift, and (ii) the potential gain (as defined in sub- section (e)(5)) on farm recapture property disposed of by gift during any one-year period in which any such gift occurs is more than 25 percent of the potential gain on farm recapture property held by the donor immediatey prior to the first of such gifts, each donee of the property shall succeed (at the time the first of such gifts is made, but in an amount determined as of the close of the donor's taxable year in which the first of such gifts is made) to the same propor- tion of the donor's excess deductions ac- count (determined, after the application of paragraphs (2) and (3) with respect to the donor, as of the close of such taxable year), as the potential gain on the property re- ceived by such donee bears to the aggregate potential gain on farm recapture property held by the donor immediately prior to the first of such gifts. (6) Joint return In the case of an addition to an excess de- ductions account for a taxable year for which a joint return was filed under section 6013, for any subsequent taxable year for which a separate return was filed the Secretary shall provide rules for allocating any remaining amount of such addition in a manner consis- tent with the purposes of this section. Page 713 § 1251