Dennis indicated that the grain elevator showed the payment to CCC as "advance"---- which means to me that the gross grain sales would have been just that------- the entire sales made available to the seller, with the payments to CCC on behalf of the seller being something NOT reported to IRS.

The key is how the CCC reports the original loan payment.  

Since CCC would NOT know that the taxpayer had made an election to report as income an amount equal to the loan proceeds------ I don't think they would report such to the IRS.

In addition------- the election by the taxpayer to report the proceeds as income is an election within the return........shows up no where else.

(I just looked on Sch F---------- look at line 5 a ...........calls for income from reporting CCC loans "under election"................so that is where the taxpayer reports his ELECTION to include the amount of loan proceeds as an income item------- and also is telling IRS by using that line 5 a that such is what he is doing.)

So.............no income reported to IRS by CCC............

Gross sales is reported.........or will be reported eventually............ by the coop or grain buyer..............ie EVENTUALLY the govt will get their way and the sales will be reported via 1099---------but now such are not.

So........... no income (as of now) that is reported via 1099 to IRS by grain buyer.

BUT......... upon audit, IRS will be looking for how the GROSS grain sales were handled.   AND, such should be handled by reporting the gross amount, just like the form calls for, in line 1 a sch F.

The deduction, so the original income is not reported twice, comes in on line 1 d..........as a cost of sales...........back to that basis thingy I mentioned earlier above.

Note that this mechanism works so that least burden is put on the taxpayer (and IRS upon audit) to keep track of the costs and income items.

First, an amount equal to the loan proceeds are reported as income, and adds to basis of grain.
Then, when grain is sold...........the entire gross proceeds, ie the sales, are reported as income.
Then, the basis of the grain (acquired by including the loan proceeds amount as income) is deducted----------- there is no matching requirement, etc etc.

If the grain is sold ultimately at a higher per bushel rate than the original loan..............or is sold for less than the original loan amount per bu..........the difference is merely washed thru the lines 1 a and d.