Exclusion from gross estate of certain farmland so long as farmland use continues

(a)

In general

Part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 is amended by inserting after section 2033 the following new section:

2033A.

Exclusion of certain family-owned farms and businesses

(a)

In general

In the case of an estate of a decedent to which this section applies, the value of the gross estate shall not include the adjusted value of any qualified family-owned farm or business included in the estate. (b)

Estates to which section applies

This section shall apply to an estate if— (1)the decedent was (at the date of the decedent’s death) a citizen or resident of the United States, and (2)during the 8-year period ending on the date of the decedent’s death there have been periods aggregating 5 years or more during which— (A)not less than 60 percent of the qualified family-owned farm or business was owned by the decedent and members of the decedent’s family, and (B)there was material participation (within the meaning of section 2032A(e)(6)) by the decedent or the qualified heir in the operation of such farm or business.

Rules similar to the rules of paragraphs (4) and (5) of section 2032A(b) shall apply for purposes of subparagraph (B).

(c)

Definitions

For purposes of this section— (1)

Qualified family-owned farm or business

The term qualified family-owned farm or business means— (A)any qualified farmland, or (B)any qualified trade or business. (2)

Qualified farmland

The term qualified farmland means any real property— (A)which is located in the United States, (B)which is used as a farm for farming purposes (within the meaning of section 2032A(e)), and (C)which was acquired from or passed from the decedent to a qualified heir of the decedent and which, on the date of the decedent’s death, was being so used by the decedent or a member of the decedent’s family. (3)

Qualified trade or business

The term qualified trade or business means any interest in a trade or business of the taxpayer— (A)which is not an interest in a C corporation, and (B)which was acquired from or passed from the decedent to a qualified heir of the decedent. (4)

Adjusted value

The term adjusted value means the value of the qualified family-owned farm or business for purposes of this chapter (determined without regard to this section), reduced by the amount deductible under paragraph (3) or (4) of section 2053(a). (5)

Other terms

Any other term used in this section which is also used in section 2032A shall have the same meaning given such term by section 2032A. (d)

Tax Treatment of Dispositions and Failures To Use for Farming Purposes

(1)

Imposition of recapture tax

If, at any time after the decedent's death and before the death of the qualified heir— (A)the qualified heir disposes of any interest in qualified family-owned farm or business (other than by a disposition to a member of his family), or (B)in the case of qualified farmland, the qualified heir ceases to use the real property which was acquired (or passed) from the decedent as a farm for farming purposes,

then, there is hereby imposed a recapture tax.

(2)

Amount of recapture tax, etc

Rules similar to the rules of section 2032A(c) with respect to the additional estate tax shall apply for purposes of this subsection with respect to the recapture tax. (e)

Application of other rules

To the extent provided by the Secretary in regulations, rules similar to the rules of subsections (e), (f), (g), (h), and (i) of section 2032A shall apply for purposes of this section.

(b)

Clerical amendment

The table of sections for part III of subchapter A of chapter 11 of such Code is amended by inserting after the item relating to section 2033 the following new item:

Sec. 2033A. Exclusion of certain family-owned farms and businesses.

(c)

Effective date

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