§1257 Disposition of converted wetlands or highly erodible croplands

Summary

Gains from selling converted wetlands or highly erodible cropland must be taxed as ordinary income, unless those gains are already taxed as ordinary income under some other rule. If you sell at a loss, that loss must be treated as a long-term capital loss. Converted wetland — land made wet as defined in the Food Security Act of 1985 (section 1201(a)(7), 16 U.S.C. 3801(7)). Highly erodible cropland — land meeting that Act’s definition (section 1201(a)(10), 16 U.S.C. 3801(10)). If land had that status for one owner, it keeps that status for later owners when their tax basis is based on the earlier owner’s basis. The Secretary must make rules like those for section 1245 and treat these ordinary amounts the same way for sections 170(e) and 751(c).