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.

This bill would let someone who sells qualifying farmland to an active farmer avoid paying tax on some of the profit, as long as they put the same amount into an IRA within 60 days after the sale. The untaxed amount can’t be more than what they contribute to their IRA in that 60-day window . The land must have been used as a farm (by the seller or a tenant farmer) for most of the past 10 years, and the buyer must be an individual actively engaged in farming and sign an agreement tied to these rules .

If the buyer stops using the land as a farm or sells it within 10 years, the buyer owes an extra tax based on the amount the seller excluded. That extra tax is calculated using the top capital gains rate, the net investment income tax rate, plus interest, and the buyer is personally responsible for paying it. If only part of the land is sold or stops being farmed, the payback is proportional. Once the seller chooses this tax break, they can’t undo it, and they can’t also claim a tax deduction for the same IRA contributions tied to the exclusion .

Key points

• Who is affected: People selling long-used farmland to active farmers; the purchasing farmers who agree to the terms .
• What changes: Sellers can exclude some capital gains by contributing to an IRA within 60 days; buyers face a 10-year farming-use requirement or an extra tax applies .
• Important details: “Qualified farmland” means U.S. land farmed or leased for farming for most of the prior 10 years; the buyer must be actively farming and sign an agreement; election is one-time and irrevocable; partial sales trigger partial payback; no double tax benefit for the same IRA dollars .