96-06 states that although both cash and land contributed to the agricultural business constitute eligible investments, only the actual cash contributed gives rise to the investment credit. The agricultural business must notify to the Secretary of the Treasury, the Secretary of Agriculture and the investors how the credit was allocated by the due date of the income tax return of its first year of operations. Once made and notified, such allocation is irrevocable. T he Act allows the investors to sell, transfer or assign all or part of their investment tax credit to any person. Only a single transfer of the credit is permitted, and only by the investor who made the contribution of cash or land to the agricultural business.
Amounts received by transferors in exchange for the credit are exempt from taxation.
Also, the purchaser or acquirer of a credit will not be considered to derive taxable income as a result of acquiring the credit for an amount that is less than the amount of the credit. A person entitled to an investment tax credit as a result of making an eligible investment, then, has the option of using the credit to offset his own taxes or, alternatively, sell or otherwise transfer it to another person who would then use it. One possibility is for the investor to assign the tax credit to a financial institution or other lender to obtain a lower cost for the financing of his investment in the agricultural business. The remaining one-half of the credit can be claimed in the following year. However, any investment credit that is not used in a taxable year may be carried forward to subsequent taxable years without limit until exhausted.