§1257 Disposition of Converted Wetlands or Highly Erodible Croplands

Summary

When someone sells land that was turned into a wetland or is highly erodible cropland, any profit from that sale must be taxed as ordinary income. That rule applies even if other tax rules exist, unless another rule already says the gain is ordinary income. If the sale results in a loss, the loss is treated as a long-term capital loss. "Converted wetland" and "highly erodible cropland" mean the lands defined under the Food Security Act of 1985. The rule covers land converted by the owner or land used for farming (not just grazing). If a later owner’s tax basis comes from an earlier owner, the land keeps the same status. The Treasury can make rules like those for similar property to carry out these rules.