PRIA, Government Policy, Made Personal

Summary

Allows a taxpayer who sells qualified farmland to a qualified farmer to spread the tax caused by that sale into four equal yearly payments. The first payment is due on the normal tax return due date for the year of the sale (no extension), and each of the next three is due on the return due date in the following years. If a payment is missed, the rest become due right away. If the seller dies, the unpaid amount becomes due on the tax return due date for the year of death. For C corporations, trusts, or estates, a liquidation, sale of most assets, stopping business, or similar events make the unpaid amounts due when the event happens (or the day before a bankruptcy filing); a buyer can take on the remaining payments if the IRS agrees. If the IRS later finds a tax shortfall for this sale, that shortfall is split across the four payments; parts that are not yet due are collected with their payment, and parts already due are collected after notice, unless the shortfall is from negligence, intentional rule-breaking, or fraud. The election to pay in installments must be made by the normal return due date for the year of sale. Partnerships and S corporations make the choice at the partner or shareholder level. The seller must attach the land-use restriction agreement to the tax return. Definitions in one line: Applicable net tax liability = the extra net tax caused by the sale (net tax with the gain minus net tax without it); Net income tax = regular tax minus certain allowable credits; Qualified farmland property = U.S. real farm land used or leased for farming for almost all of the prior 10 years and legally required to stay farm land for 10 years after the sale; Qualified farmer = an individual actively engaged in farming under federal rules.

Title 26, §1062

Internal Revenue Code, Source: USLM XML via OLRC

(a)Election to pay tax in installments

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.

(b)Rules relating to installment payments

(1)Date for payment of installments

If an election is made under subsection (a), 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 and each succeeding installment shall be paid on the due date (as so determined) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.

(2)Acceleration of payment

(A)In general

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.

(B)Individuals

In the case of an individual, if the individual dies, then the unpaid portion of all remaining installment shall be paid on the due date for the return of tax for the taxable year in which the taxpayer dies.

(C)C corporations

In the case of a taxpayer which is a C corporation, trust, or estate, if there is a liquidation or sale of substantially all the assets of the taxpayer (including in a title 11 or similar case), a cessation of business by the taxpayer (in the case of a C corporation), or any similar circumstance, then the unpaid portion of all remaining installments shall be due on the date of such event (or in the case of a title 11 or similar case, the day before the petition is filed). The preceding sentence shall not apply to the sale of substantially all the assets of a taxpayer to a buyer if such buyer enters into an agreement with the Secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the taxpayer.

(3)Proration of deficiency to installments

If an election is made under subsection (a) to pay the applicable net tax liability in installments and a deficiency has been assessed with respect to such applicable net tax liability, the deficiency shall be prorated to the installments payable under subsection (a). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This section shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.

(c)Election

(1)In general

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).

(2)Partnerships and S corporations

In the case of a sale or exchange described in subsection (a) by a partnership or S corporation, the election under subsection (a) shall be made at the partner or shareholder level. The Secretary may prescribe such regulations or other guidance as necessary to carry out the purposes of this paragraph.

(d)Definitions

For purposes of this section

(1) Applicable net tax liability

(2)Qualified farmland property

(A)In general

The term “qualified farmland property” means real property located in the United States—

(i)which—

(I)has been used by the taxpayer as a farm for farming purposes, or

(II)leased by the taxpayer to a qualified farmer for farming purposes,

during substantially all of the 10-year period ending on the date of the qualified sale or exchange, and (ii)

For purposes of clause (i), property which is used or leased by a partnership or S corporation in a manner described in such clause shall be treated as used or leased in such manner by each person who holds a direct or indirect interest in such partnership or S corporation.

(B)Farm; farming purposes

The terms “farm” and “farming purposes” have the respective meanings given such terms under section 2032A(e).

(3)Qualified farmer

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))).

(e)Return requirement

A taxpayer making an election under subsection (a) shall include with the return for the taxable year of the sale or exchange described in subsection (a) a copy of the covenant or other legally enforceable restriction described in subsection (d)(2)(A)(ii).

Notes & Related Subsidiaries

Editorial Notes

References in Text

Subsections (b) and (c) of section 1001 of the Food Security Act of 1986, referred to in subsec. (d)(3), probably should be a reference to subsections (b) and (c) of section 1001A of the Food Security Act of 1985, which is classified to section 1308–1(b), (c) of Title 7, Agriculture.

Prior Provisions

A prior section 1062 was renumbered section 1063 of this title.

Statutory Notes and Related Subsidiaries

Effective Date

Pub. L. 119–21, title VII, § 70437(c), July 4, 2025, 139 Stat. 250, provided that: “The

Amendments

made by this section [enacting this section and renumbering former section 1062 of this title as section 1063] shall apply to sales or exchanges in taxable years beginning after the date of the enactment of this Act [July 4, 2025].”

§1062 Gain From the Sale or Exchange of Qualified Farmland Property to Qualified Farmers