This bill excludes from gross income the gain from the sale or exchange of qualified farmland property to a qualified farmer that is contributed to an individual retirement account (IRA). This generally prevents the federal capital gains tax from being imposed on such gain. (Conditions apply.)
Specifically, the bill excludes from gross income any gain from the sale or exchange of qualified farmland property contributed to an IRA within 60 days of the sale or exchange if
The bill defines qualified farmland property as real property located in the United States that, for substantially all of the 10 years preceding the sale or exchange, is used by the farmer (or lessee) for farming purposes.
However, under the bill, if the qualified farmland property is disposed of or no longer used for farming within the first 10 years after the sale or exchange, a tax is imposed on the qualified farmer equal to the amount excluded from gross income multiplied by the sum of the highest tax rate on adjusted net capital gains and the net investment income tax rate (currently 23.8%), plus interest.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 930 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 930
To amend the Internal Revenue Code of 1986 to exclude from gross income
capital gains from the sale of certain farmland property which are
reinvested in individual retirement plans.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 11 (legislative day, March 10), 2025
Mr. McConnell introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exclude from gross income
capital gains from the sale of certain farmland property which are
reinvested in individual retirement plans.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. EXCLUSION OF CERTAIN CAPITAL GAINS FROM THE SALE OF CERTAIN
FARMLAND PROPERTY.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section
139I the following new section:
``SEC. 139J. GAIN FROM THE SALE OR EXCHANGE OF QUALIFIED FARMLAND
PROPERTY TO QUALIFIED FARMERS.
``(a) In General.--If a taxpayer makes an election under this
section and files the agreement referred to in subsection (d)(2), gross
income shall not include so much of the gain from the sale or exchange
of qualified farmland property to a qualified farmer as does not exceed
the aggregate amount contributed by the taxpayer to an individual
retirement plan during the 60-day period beginning on the date of such
sale or exchange.
``(b) Qualified Farmland Property; Qualified Farmer.--For purposes
of this section--
``(1) Qualified farmland property.--The term `qualified
farmland property' means real property located in the United
States which--
``(A) has been used by the taxpayer as a farm for
farming purposes, or
``(B) leased by the taxpayer to a farmer for
farming purposes,
during substantially all of the 10-year period ending on the
date of the qualified sale or exchange.
``(2) Qualified farmer.--The term `qualified farmer' means
any individual who--
``(A) is actively engaged in farming (within the
meaning of subsections (b) and (c) of section 1001 of
the Food Security Act of 1986 (7 U.S.C. 1308-1(b) and
(c))), and
``(B) is designated in an agreement under
subsection (d)(2).
``(c) Tax Treatment of Further Dispositions or Non-Farm Use.--
``(1) In general.--If, within 10 years after the date of
the sale or exchange--
``(A) the qualified farmer disposes of any interest
in qualified farmland property, or
``(B) the qualified farmer ceases to use the
qualified farmland property as a farm for farming
purposes,
then, in addition to any other tax, there is hereby imposed for
the taxable year of such disposition or cease in use, a tax in
the amount determined under paragraph (2).
``(2) Amount of tax.--The amount of tax determined under
this paragraph is an amount equal to the sum of--
``(A) the product of--
``(i) the amount excluded from the gross
income under subsection (a), and
``(ii) the sum of--
``(I) the highest rate of tax on
adjusted net capital gain under section
1(h), plus
``(II) the rate of tax applicable
under section 1411, plus
``(B) interest at the underpayment rate established
under section 6621 on the amount determined under
subparagraph (A) for each prior taxable year for the
period beginning with the taxable year in which the
sale or exchange occurred.
``(3) Liability for tax.--The qualified farmer shall be
personally liable for the additional tax imposed by this
subsection.
``(4) Partial dispositions.-- For purposes of this
subsection, where the qualified farmer disposes of a portion of
the qualified farmland acquired by such qualified farmer or
there is a cessation of use of such a portion as a farm for
farming purposes, the amount determined under paragraph
(2)(A)(i) shall be the amount which bears the same ratio the
amount otherwise determined under such paragraph as--
``(A) the portion of the qualified farmland so
disposed or ceased to be used, bears to
``(B) the entire amount of the qualified farmland
so acquired.
``(d) Election.--
``(1) In general.--An election under subsection (a) shall
be made at such time and in such form and manner as the
Secretary shall prescribe. Such an election, once made, shall
be irrevocable.
``(2) Agreement.--The agreement referred to in this
paragraph is a written agreement signed by the qualified farmer
designated in such agreement consenting to the application of
subsection (c) with respect to the qualified farmland property.
Such agreement shall include a statement indicating the amount
described in subsection (c)(2)(A)(i).
``(e) Definitions and Special Rules.--For purposes of this
section--
``(1) Farm; farming purposes.--For purposes of this
section, the terms `farm' and `farming purposes' have the
respective meanings given such terms under section 2032A(e).
``(2) Statute of limitations.--If qualified farmland
property is disposed of or ceases to be used as a farm for
farming purposes, then--
``(A) the statutory period for the assessment of
any tax under subsection (c) attributable to such
disposition or cessation shall not expire before the
expiration of 3 years from the date the Secretary is
notified (in such manner as the Secretary may by
regulations prescribe) of such disposition or
cessation, and
``(B) such tax may be assessed before the
expiration of such 3-year period notwithstanding the
provisions of any other law or rule of law which would
otherwise prevent such assessment.
``(3) Involuntary conversions and like-kind exchanges.--
``(A) Involuntary conversions.--Under regulations
provided by the Secretary, no tax shall be imposed
under subsection (c) if there is an involuntary
conversion (within the meaning of section 2032A(h)(3)
of an interest in qualified farmland property.
``(B) Like-kind exchanges.--Rules similar to the
rules of section 2032A(i) shall apply where qualified
farmland property is disposed of in a transaction which
qualifies under section 1031.
``(4) No double benefit.--No deduction shall be allowed
under section 219 with respect so much of the qualified
retirement contributions for the taxable year as does not
exceed the amount excluded from income under subsection (a).''.
(b) Waiver of Contribution Limitation.--Section 408 of the Internal
Revenue Code of 1986 is amended by redesignating subsection (r) as
subsection (s) and by inserting after subsection (q) the following new
subsection:
``(r) Increased Limitation for Contributions of Qualified Farmland
Gain.--
``(1) In general.--For purposes of applying subsections
(a)(1) and (b)(2)(B), the amount in effect under section
219(b)(1)(A) for any taxable year shall be increased by the
lesser of--
``(A) the aggregate amount of gain by the taxpayer
from the sale or exchange of qualified farmland
property to a qualified farmer during the period
beginning 60 days before the first day of such taxable
year and ending with the last day of such taxable year,
or
``(B) the amount contributed during the 60-day
period ending with such sale or exchange to individual
retirement plans of the taxpayer.
``(2) Definitions.--Any term used in this section which is
used in section 139J shall have the meaning given such term
under such section.''.
(c) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting after the item relating to section 139I the
following new item:
``Sec. 139J. Gain from the sale or exchange of qualified farmland
property to qualified farmers.''.
(d) Effective Date.--The amendments made by this section shall
apply to sales or exchanges in taxable years beginning after the date
of the enactment of this Act.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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