26 U.S.C. § 1301 — Averaging of farm income

(a) In general. If an individual engaged in a farming or fishing business makes the election, the tax under section 1 for the taxable year^* equals: (1) the tax under section 1 on taxable income after subtracting elected farm income; plus (2) the increase in tax under section 1 that would result if each of the three prior taxable years had its taxable income increased by one-third of the elected farm income. Any adjustment made under this section for one year must also be used when applying this section in a later year.

(b) Definitions. In this section:

(1) Elected farm income. (A) It is the part of the current year’s taxable income that comes from a farming or fishing business and that the taxpayer^* identifies in the election under subsection (a). (B) For this purpose, gain from selling or otherwise disposing of property other than land is treated as coming from the farming or fishing business if the taxpayer regularly used the property in that business for a substantial period.

(2) “Individual” does not include an estate or trust.

(3) “Farming business” has the meaning given in section 263A(e)(4).

(4) “Fishing business” means conducting commercial fishing as defined in section 3 of the Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 1802).

(c) Regulations. The Secretary^* must issue suitable regulations to carry out this section. The regulations may address: (1) the order and method for counting income, gains, deductions, losses, and tax limits when calculating the tax for a taxpayer covered by this section; and (2) how to handle a short taxable year.