Nonrecognition of gain from sale of real property upon subsequent purchase of renewable energy property

(a)

In general

Part III of subchapter O of chapter 1 of the Internal Revenue Code of 1986 (relating to common nontaxable exchanges) is amended by adding at the end the following new section:

1046.

Nonrecognition of gain from sale of real property upon subsequent purchase of renewable energy property

(a)

General rule

If— (1) the taxpayer elects in such form as the Secretary may prescribe the application of this section with respect to any sale of real property located in the United States, (2)such sale gives rise to gain, and (3)the seller of such property acquires renewable energy property within the replacement period,

then, except as provided in subsections (b) and (e), no gain shall result to the taxpayer from the sale of such property.

(b)

Amount of gain resulting

(1)

In general

In the case of an acquisition of renewable energy property to which subsection (a) applies, gain shall result from such acquisition to the extent that the price for which such real property is sold exceeds the cost of the renewable energy property acquired. (2)

Gain recognized

Except as provided in this section, the gain determined under paragraph (1) shall be recognized, notwithstanding any other provision of this subtitle. (c)

Definitions and special rules

For purposes of this section— (1)

Renewable energy property

The term renewable energy property means a facility located in the United States which uses renewable energy sources as a primary feedstock for the generation of electricity or the manufacture of motor vehicle fuels. (2)

Special rule relating to stock and interests in partnerships

(A)

Partnership interest

An interest in a partnership shall be treated as an interest in each of the assets of the partnership and not as an interest in the partnership. (B)

Stock in corporation

Stock in a corporation the principal business of which is owning or operating renewable energy property shall be treated as such property. (C)

Cooperatives

Rules similar to the rules of subparagraph (A) or (B), as appropriate, shall apply in the case of an organization which is subject to section 521 or to which part I of subchapter T applies. (3)

Replacement period

The term replacement period means the 2-year period beginning on the date of the sale of real property with respect to which there is in effect an election under subsection (a). (4)

Requirement that property be identified

For purposes of this section, any property received by the taxpayer shall be treated as property which is not like-kind property if such property is not identified as property to be received in the exchange on or before the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange. (d)

Basis of renewable energy property

The basis shall be the same as that of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange. (e)

Recapture

(1)

In general

If a taxpayer disposes of any renewable energy property, then, notwithstanding any other provision of this title, gain (if any) shall be recognized to the extent of the gain which was not recognized under subsection (a) by reason of the acquisition by such taxpayer of such renewable energy property. (2)

Certain dispositions not taken into account

For purposes of paragraph (1), there shall not be taken into account any disposition— (A)after the death of the taxpayer, (B)in a compulsory or involuntary conversion (within the meaning of section 1033) if the exchange occurred before the threat or imminence of such conversion, or (C)with respect to which it is established to the satisfaction of the Secretary that such disposition had as one of its principal purposes the avoidance of Federal income tax. (f)

Statute of limitations

If any gain is realized by the taxpayer on the sale or exchange of any renewable energy property and there is in effect an election under subsection (a) with respect to such gain, then— (1)the statutory period for the assessment of any deficiency with respect to such gain shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may by regulations prescribe) of— (A)the taxpayer's cost of purchasing renewable energy property which the taxpayer claims results in nonrecognition of any part of such gain, (B)the taxpayer's intention not to purchase renewable energy property within the replacement period, or (C)a failure to make such purchase within the replacement period, and (2)such deficiency 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.

(b)

Conforming amendment

Section 1016(a) of such Code is amended by striking and at the end of paragraph (27), by striking the period at the end of paragraph (28) and inserting , and, and by adding at the end the following new paragraph:

(29)in the case of property the acquisition of which resulted under section 1046 in the nonrecognition of any part of the gain realized on the sale of other property, to the extent provided in section 1046.

(c)

Clerical amendment

The table of sections for part III of subchapter O of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 1046. Nonrecognition of gain from sale of real property upon subsequent purchase of renewable energy property

(d)

Effective date

The amendments made by this section shall apply with respect to real property sold after December 31, 2004.