Treatment of Capital Gains from the Sale of Certain Farmland Property
Section 70437 · Sec. 70437 ·
What this chapter is about
This part lets a seller of farmland pay the tax in four yearly parts. The buyer must be a working farmer. The whole balance falls due if a part is missed or the seller dies. The choice must be made by the return due date.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70437 in the PDF
What the document says
“In the case of gain from the sale or exchange of qualified farmland property to a qualified farmer, at the election of the taxpayer, the portion of the net income tax of such taxpayer for the taxable year of the sale or exchange which is equal to the applicable net tax liability shall be paid in 4 equal installments.”
The section adds a new section 1062 to part IV of subchapter O of chapter 1 of the Internal Revenue Code of 1986, redesignating section 1062 as section 1063. Where a taxpayer elects, the part of net income tax for the year of a sale or exchange of qualified farmland property to a qualified farmer that equals the applicable net tax liability is paid in four equal installments. The applicable net tax liability is the excess of net income tax for the year over what it would be without the gain.
What the document actually says
“In the case of gain from the sale or exchange of qualified farmland property to a qualified farmer, at the election of the taxpayer, the portion of the net income tax of such taxpayer for the taxable year of the sale or exchange which is equal to the applicable net tax liability shall be paid in 4 equal installments.”
That sentence, in plain words
The tax on the sale may be paid in four equal parts. The seller must choose this. The land must go to a working farmer.
What this is about
Only the tax caused by the gain may be split. The rest is paid the normal way. The next rules set when each part is due.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70437 in the PDF
What the document says
“the first installment shall be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year in which the sale or exchange occurs”
The section requires the first installment on the return due date for the year of the sale, worked out without regard to any filing extension, and each later installment on the return due date for the following taxable year.
What the document actually says
“the first installment shall be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year in which the sale or exchange occurs”
That sentence, in plain words
The first part is due when the return is due. That date ignores any filing extension. It is the year of the sale.
What this is about
Each later part is due a year after the last. So the four parts fall over four years. An extension does not move the date.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70437 in the PDF
What the document says
“If there is an addition to tax for failure to timely pay any installment required under this section, then the unpaid portion of all remaining installments shall be due on the date of such failure.”
The section brings the rest of the installments due on the day of a failure to pay one on time. For an individual, the rest falls due on the return date for the year of death. For a C corporation, trust or estate, the rest falls due on a liquidation or sale of substantially all assets, a cessation of business, or a similar event, or the day before a bankruptcy petition, unless the buyer of those assets agrees with the Secretary to take on the remaining installments. A deficiency assessed on the liability is spread across the installments, with the part on installments not yet due collected with them, unless the deficiency is due to negligence, intentional disregard or fraud.
What the document actually says
“If there is an addition to tax for failure to timely pay any installment required under this section, then the unpaid portion of all remaining installments shall be due on the date of such failure.”
That sentence, in plain words
Missing one part brings all the rest due. They fall due on the day of the failure.
What this is about
Death does the same for an individual. Winding up does the same for a firm. A buyer of the assets may take the payments over instead.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: sellers of qualified farmland propertyHow: statuteSec. 70437 in the PDF
What the document says
“Any election under subsection (a) shall be made not later than the due date for the return of tax for the taxable year described in subsection (a).”
The section requires the election to be made by the return due date for the year of the sale, and provides that for a sale by a partnership or S corporation the election is made at the partner or shareholder level, with the Secretary able to prescribe rules to carry that out.
What the document actually says
“Any election under subsection (a) shall be made not later than the due date for the return of tax for the taxable year described in subsection (a).”
That sentence, in plain words
The choice must be made by the return due date. That is the return for the year of the sale.
What this is about
A partnership does not choose for itself. Each partner chooses on their own return. The Secretary may write rules on how.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“The term `qualified farmer' means any individual who 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))).”
The section defines a qualified farmer as an individual actively engaged in farming within the meaning of subsections (b) and (c) of section 1001 of the Food Security Act of 1986. The terms farm and farming purposes take their meaning from section 2032A(e) of the Internal Revenue Code of 1986. A taxpayer making the election must file with the return a copy of the covenant or other legally enforceable restriction the section requires. The amendments apply to sales or exchanges in taxable years beginning after enactment.
What the document actually says
“The term `qualified farmer' means any individual who 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))).”
That sentence, in plain words
The buyer must be an individual who really farms. An older farm law says what that means.
What this is about
A passive owner does not count. The seller must also file a copy of the land covenant. That goes in with the tax return.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the new section does: allow the election to pay in four installments, set when each installment is due, set when the remainder is accelerated, deal with a deficiency, set when and by whom the election is made, define a qualified farmer, and require the covenant to be filed with the return, with the effective date.
The definition of applicable net tax liability and the details of qualified farmland property, which are carried in summaries. The clerical amendment is also not recorded.
The section adds a section to the Internal Revenue Code of 1986 and points to section 2032A(e) and to section 1001 of the Food Security Act of 1986, neither of which is indexed here.
