109 HR 5892 IH: Farmers Tax Deferral U.S. House of Representatives 2006-07-26 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 2d Session H. R. 5892 IN THE HOUSE OF REPRESENTATIVES July 26, 2006 Mr. Aderholt 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 special rules for the exchange or installment sale of certain agricultural property.

1.

Short title

This Act may be cited as the Farmers Tax Deferral Act.

2.

Nontaxable exchange of qualified agricultural property for real 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.

Exchange of qualified agricultural property for real property

(a)

In general

No gain or loss shall be recognized to a qualified person on the receipt of United States real property in exchange for any qualified agricultural property. (b)

Qualified person

For purposes of this section, the term qualified person means— (1)any individual who has attained age 55 as of the date that such real property is received, (2)any corporation if all of the outstanding stock of such corporation is owned by one or more individuals described in paragraph (1), and (3)any partnership, trust, or estate if all of the beneficial interests in such partnership, trust, or estate are owned by one or more individuals described in paragraph (1). (c)

Qualified agricultural property

The term qualified agricultural property means— (1)any single purpose agricultural or horticultural structure (as defined in section 168(i)(13)) which was placed in service by the taxpayer more than 20 years before the date that such structure is transferred in the exchange described in subsection (a), and (2)any real property, equipment, or fixtures which are related in use to such structure. (d)

United States real property

For purposes of this section, the term United States real property means real property located in the United States. (e)

Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property

For purposes of this section, any property received by the taxpayer shall be treated as property which is not real property if— (1)such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or (2)such property is received after the earlier of— (A)the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or (B)the due date (determined with regard to extension) for the transferor’s return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs. (f)

Application of rules regarding basis, exchanges not solely in kind, and related parties

Rules similar to the rules of subsections (b), (c), (d), (f), and (g) of section 1031 shall apply for purposes of this section. (g)

Treatment as section 1031 exchange

For purposes of this title (other than sections 1031 and 1245), a transaction described in this section shall be treated in the same manner as a transaction described in section 1031.

. (b)

Ordinary income recapture deferred until disposition of real property acquired in exchange

Subsection (b) of section 1245 of such Code is amended by adding at the end the following new paragraph: (9)

Special rule for like kind exchanges of qualified agricultural property

(A)

In general

If qualified agricultural property (as defined in section 1046(c)) is disposed of and gain (determined without regard to this section) is not recognized in whole or in part under section 1046, then the amount of gain taken into account by the transferor under subsection (a)(1) shall not exceed the sum of— (i)the amount of gain recognized on such disposition (determined without regard to this section), plus (ii)the fair market value of property acquired which is not taken into account under clause (i) and which is not— (I)section 1245 property, or (II)United States real property. (B)

Ordinary income recapture on disposition of real property acquired in exchange

If United States real property acquired in an exchange to which section 1046 applies is disposed of by the transferee, the lesser of— (i)the excess of— (I)the amount realized on the disposition of such real property (in the case of a disposition other than a sale, exchange, or involuntary conversion, the fair market value of such real property), over (II)the adjusted basis of such real property, or (ii)the excess of— (I)the amount of gain that would have been treated as ordinary income under this section if such qualified agricultural property were sold at fair market value on the date of the disposition of such qualified agricultural property, over (II)the amount of gain recognized as ordinary income under this subparagraph with respect to such qualified agricultural property on the disposition of any other real property, shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.. (c)

Effective date

(1)

Subsection (a)

The amendments made by subsection (a) shall apply to transfers after the date of the enactment of this Act. (2)

Subsection (b)

The amendments made by subsection (b) shall apply to dispositions after the date of the enactment of this Act.

3.

Special rules for installment sales of qualified agricultural property

(a)

In general

Subsection (i) of section 453 of the Internal Revenue Code of 1986 is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following new paragraph: (2)

Special rule for qualified agricultural property

Notwithstanding paragraph (1), in the case of any installment sale of qualified agricultural property (as defined in section 1046(c), applied by substituting the installment sale described in section 453(i)(2) for the exchange described in subsection (a) in paragraph (1) thereof) to which subsection (a) applies— (A)income from the installment sale shall be taken into account under the installment method, and (B)income recognized for any taxable year from such sale under such method shall be recognized as recapture income in such year in the same proportion to such income recognized for such year from such sale as— (i)the aggregate recapture income from such sale (recognized or to be recognized when payment is completed), bears to (ii)the aggregate income from such sale (so recognized or to be recognized). . (b)

Conforming amendment

Paragraph (3) of section 453(i) of such Code, as redesignated under this section, is amended by striking paragraph (1) and inserting this subsection. (c)

Effective date

The amendments made by this section shall apply to sales after the date of the enactment of this Act.