Farmland Capital Gains Equity Act of 2005

Farmland Capital Gains Equity Act of 2005 - Amends the Internal Revenue Code to provide an exclusion from gross income of gain from the sale of qualified farm property. Defines "qualified farm property" as U.S. property used by a taxpayer or a member of his family as a farm for farming purposes for at least three years. Requires such taxpayer or family member to materially participate in the operation of the farm.

Limits the amount of such exclusion to $500,000 ($250,000 in the case of a married individual filing a separate return), reduced by the aggregate amount of gain excluded for all preceding taxable years.

[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 775 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 775

To amend the Internal Revenue Code of 1986 to provide an exclusion for 
 gain from the sale of farmland which is similar to the exclusion from 
               gain on the sale of a principal residence.


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                    IN THE HOUSE OF REPRESENTATIVES

                           February 10, 2005

 Mr. Osborne (for himself, Mr. Green of Wisconsin, Mr. Hostettler, Mr. 
Paul, Mr. Skelton, Mr. Wamp, and Mr. Pomeroy) introduced the following 
      bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide an exclusion for 
 gain from the sale of farmland which is similar to the exclusion from 
               gain on the sale of a principal residence.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Farmland Capital Gains Equity Act of 
2005''.

SEC. 2. EXCLUSION OF GAIN FROM SALE OF CERTAIN FARMLAND.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically excluded 
from gross income) is amended by adding after section 121 the following 
new section:

``SEC. 121A. EXCLUSION OF GAIN FROM SALE OF QUALIFIED FARM PROPERTY.

    ``(a) Exclusion.--In the case of a natural person, gross income 
shall not include gain from the sale or exchange of qualified farm 
property.
    ``(b) Limitation on Amount of Exclusion.--
            ``(1) In general.--The amount of gain excluded from gross 
        income under subsection (a) with respect to any taxable year 
        shall not exceed $500,000 ($250,000 in the case of a married 
        individual filing a separate return), reduced by the aggregate 
        amount of gain excluded under subsection (a) for all preceding 
        taxable years.
            ``(2) Special rule for joint returns.--The amount of the 
        exclusion under subsection (a) on a joint return for any 
        taxable year shall be allocated equally between the spouses for 
        purposes of applying the limitation under paragraph (1) for any 
        succeeding taxable year.
    ``(c) Qualified Farm Property.--For purposes of this section--
            ``(1) In general.--The term `qualified farm property' means 
        real property located in the United States if, during periods 
        aggregating 3 years or more of the 5-year period ending on the 
        date of the sale or exchange of such real property--
                    ``(A) such real property was used by the taxpayer 
                or a member of the family of the taxpayer as a farm for 
                farming purposes, and
                    ``(B) there was material participation by the 
                taxpayer (or such a member) in the operation of the 
                farm.
            ``(2) Other definitions.--The terms `member of the family', 
        `farm', and `farming purposes' have the respective meanings 
        given such terms by paragraphs (2), (4), and (5) of section 
        2032A(e).
            ``(3) Special rules.--Rules similar to the rules of 
        paragraphs (4) and (5) of section 2032A(b) and paragraphs (3) 
        and (6) of section 2032A(e) shall apply.
    ``(d) Other Rules.--For purposes of this section, rules similar to 
the rules of subsections (d), (e) and (f) of section 121 shall 
apply.''.
    (b) Conforming Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding after the item relating to section 121 the following 
new item:

``Sec. 121A. Exclusion of gain from sale of qualified farm property.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to any sale or exchange on or after December 31, 2004.
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