Sponsors (5)
The bill lets farmland sellers defer immediate capital gains tax by rolling proceeds into IRAs and offers narrow safe harbors, but it creates a lengthy (10-year) recapture exposure with personal liability, reduces concurrent IRA deduction benefits, and extends audit risk.
Farmers and other sellers of qualified farmland can exclude a portion of capital gains by depositing sale proceeds into an IRA within 60 days, lowering their immediate tax bill on the sale.
Farmers who suffer involuntary conversions or use like-kind exchange mechanisms have clear safe harbors that can prevent recapture of the excluded gain in certain reinvestment or loss situations, reducing tax uncertainty in those cases.
Sellers are encouraged to save for retirement because the rule permits timely, larger IRA contributions tied to farmland sale proceeds, making rollover into retirement accounts more accessible.
Farmers who later sell the land, stop farming, or change its use within 10 years face recapture of the excluded gain — payable at top capital-gains + NIIT rates plus interest — creating substantial unexpected tax liabilities.
Qualified farmers are personally liable for any recapture amount, exposing them to direct collection risk and potentially large out-of-pocket tax bills if conditions triggering recapture occur.
Contributors cannot also claim a §219 deduction for IRA contributions up to the amount of the excluded gain, reducing the net tax benefit of making those rollover contributions.
Based on analysis of 2 sections of legislative text.
Allows sellers to exclude farmland capital gain if they contribute proceeds to an IRA within 60 days and raises IRA limits accordingly, with a 10-year recapture for nonfarm use.
Official title: 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.
Introduced March 11, 2025 by Addison Mitchell McConnell · Last progress March 11, 2025
Creates a new tax rule letting a seller exclude capital gain on the sale of qualifying farmland to a designated qualified farmer if the seller timely transfers an amount equal to the gain into an individual retirement account (IRA). The exclusion is limited to the amount contributed to the IRA during the 60-day window starting at the sale and is subject to a 10-year recapture if the buyer stops farming or disposes of the property. Also adjusts IRA rules so the seller may increase IRA contribution limits for the year by the lesser of the qualified farmland gain in a specified window or the actual contribution made in that 60-day period. The change adds filing and agreement requirements, extends the IRS assessment window for these transactions, and takes effect for taxable years beginning after enactment.