We receive a lot of great questions at the Center. We are publishing the following question and answer for our TaxPlace subscribers because it likely has widespread applicability.
Some of my clients are livestock producers that received indemnity payments this year (2014) for livestock losses that occurred in 2012 and 2013. The USDA’s Farm Service Agency (FSA) is issuing a 1099G for the full amount of the payment. In many situations, however, a portion of the payment is compensation for death loss of breeding livestock. If the clients would have sold the breeding livestock the sale would have triggered I.R.C. §1231 gain that would have been reported on Form 4797. Is it possible to allocate a portion of the disaster proceeds from Schedule F to Form 4797?