[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.77-2]

[Page 308-309]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.77-2  Effect of election to consider commodity credit loans as 
income.

    (a) If a taxpayer elects or has elected under section 77, section 
123 of the Internal Revenue Code of 1939, or section 223(d) of the 
Revenue Act of 1939 (53 Stat. 897), as amended, to include in his gross 
income the amount of a loan from the Commodity Credit Corporation for 
the taxable year in which it is received, then--
    (1) No part of the amount realized by the Commodity Credit 
Corporation upon the sale or other disposition of the commodity pledged 
for such loan shall be recognized as income to the taxpayer, unless the 
taxpayer receives an amount in addition to that advanced to him as the 
loan, in which event such additional amount shall be included in the 
gross income of the taxpayer for the taxable year in which it is 
received, and
    (2) No deductible loss to the taxpayer shall be recognized on 
account of any deficiency realized by the Commodity Credit Corporation 
on such loan if the taxpayer was relieved from liability for such 
deficiency.

[[Page 309]]

    (b) The application of paragraph (a) of this section may be 
illustrated by the following example:

    Example. A, a taxpayer who elected for his taxable year 1952 to 
include in gross income amounts received as loans from the Commodity 
Credit Corporation, received as loans $500 in 1952, $700 in 1953, and 
$900 in 1954. In 1956 all the pledged commodity was sold by the 
Commodity Credit Corporation for an amount $100 and $200 less than the 
loans with respect to the commodity pledged in 1952 and 1953, 
respectively, and for an amount $150 greater than the loan with respect 
to the commodity pledged in 1954. A, in making his return for 1956, 
shall include in gross income the sum of $150 if it is received during 
that year, but will not be allowed a deduction for the deficiencies of 
$100 and $200 unless he is required to satisfy such deficiencies and 
does satisfy them during that year.