Out of Operation
If a business or farm operation has not been in operation
for the full two taxable years preceding the displacement year,
net earnings must be based on the actual period of operation at
the displacement site, projected to an annual rate. An example for
making annual projection calculations follows.
A business begun in 1982, and operated for three months during
that tax year. It operated for 12 months in the 1983 tax year, and
relocated in February 1984.
GIVEN:
- Net earnings for 1982 = $1,000 (3 months)
- Net earnings for 1983 = $14,000 (12 months)
FORMULA:
- Projected annual net earnings = Total net earnings x 12 / Months in operation
CALCULATION:
- Projected annual net earnings = $15,000 x 12 / 15 = $12,000