Rev. Rul. 65-97

Advice has been requested regarding when payments received by a taxpayer under the provisions of the United States Department of Agriculture `1963 Wheat Stabilization Program', are to be included in gross income for Federal income tax purposes.

The law governing the `1963 Wheat Stabilization Program' provides for payments to producers who voluntarily divert acreage from wheat production and devote it to conservation uses for the entire calendar year. To participate in the 1963 Wheat Program Form ASCS-654, Intention to Participate and Application for Payment, must have been filed by the farm operator at the ASCS (Agricultural Stabilization and Conservation Service) county office within the designated signup period. For the 1963 program, the fall signup period for winter wheat extended from October 15, 1962, through December 14, 1962, and the spring signup period for spring wheat extended from February 1, 1963, through March 22, 1963. In addition to providing acreage diversion payments, the law governing this program also provides for support payments if certain requirements are met.

Form ASCS-654 was used to record the producer's agreement to participate in the `1963 Wheat Stabilization Program' and as an application for both advance and final payments. The law permits an advance payment of one-half of the diversion payment at the time the agreement to participate in the program is signed. The form sets forth such information as acreage data and payment computations and contains space for each producer's signature. There is also space for the approval of the advance and final payment by the county committee, and for recording each payment.

Generally, final payments to producers under this program are made after Part III of Form ASCS-654 is signed indicating that there has been compliance with the 1963 Wheat Stabilization Program Regulation, as amended.

ASCS county committees are responsible for determining eligibility of the producers for payment. Compliance checks are begun as soon as possible after crops have been planted since measurements must be completed on each individual farm before that farm is eligible for final payment. Final payment may be made after a date generally within the period from May 1 through September 1, 1963. Three requirements must be met before payments may be made in any specific locality. These are: (1) Funds must be available, (2) compliance checks must be substantially complete, and (3) the `disposition date' for the disposition of crops on excess wheat acreage must have passed.

The `disposition date' is the date by which any wheat crop growing on acreage planted in excess of that permitted to a participating farm must be disposed of or otherwise destroyed. No payment to a producer will be made under the program unless there has been a disposition of the crop on the farm's excess acreage, if any. This disposition date, which varies by States and localities, may be from May 1 through September 1. The three requirements set out above are completed by the end of the calendary year.

Section 451(a) of the Internal Revenue Code of 1954 provides that any item of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under the method of accounting used in computing taxable income, such amount is to be properly accounted for as of a different time.

Section 1.451-2(a) of the Income Tax Regulations provides in pertinent part, as follows:

Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given.

The general rule under section 451 of the Code and the regulations issued thereunder is applicable with respect to payments received under the `1963 Wheat Stabilization Program.'

Therefore, it is held that the advance and final diversion payments in the instant case are includible in the gross income of the producer when they are received by him, or when they are made available to him, whichever is earlier. In this case final payment is made available to the producer in the calendar year the farm is found to be in compliance with the requirements of the program. The fact that the producer does not sign Form ASCS-654 application for the final payment will not in itself serve to defer the reporting of the payments to a later year.