EVERETT URGES IRS TO TREAT PEANUT QUOTA BUY-OUT AS CAPITAL GAIN
"WASHINGTON, D.C. -" Alabama Congressman Terry Everett is calling upon the Internal Revenue Service to classify the upcoming peanut quota buy-out as a "capital gain" for tax purposes noting that to do otherwise would be a policy reversal. If the IRS were to rule quota buy-out as normal income for tax purposes, quota holders would, in effect, be taxed at double the 20 percent capital gains rate.
Everett, chairman of the House Agriculture subcommittee on Specialty Crops and Foreign Agriculture Programs, said he is writing a letter to the IRS calling on the federal agency to rule the peanut quota buy-out as a capital gain for quota holders and stating that the agency should not reverse itself after having previously ruled quota sales as capital gains. Congressman Everett's letter will be co-signed by fellow lawmakers from all peanut producing states.
In his letter to Commissioner Charles Rossotti, Everett states: "It is our understanding that the Internal Revenue Service has ruled in previous cases...that peanut quotas are intangible assets used in business, and that they are both useful and valuable, and therefore considered a capital asset. Since quota has been classified as a capital asset, payments received from the sale of quota have previously been treated as capital gains for tax purposes."
Everett has also urged Senators from peanut producing states to contact the IRS and ask that quota buy-out be treated as capital gains.
"There is precedence as recent as 1991 where the IRS ruled quota sales as capital gains," Everett notes. "It seems unlikely to me that they would now be able to reverse themselves. I do not intend on seeing that happen."
Meanwhile, officials with the IRS have assured Congressman Everett's office that they have yet to make a decision on whether to classify the peanut quota buy-out as normal income or as a capital gain. A final decision is expected within the next two weeks.