§1257 Disposition of Converted Wetlands or Highly Erodible Croplands

Summary

When you sell land that is a converted wetland or highly erodible cropland, any profit you make must be reported as ordinary income. That rule applies even if other tax rules exist, unless some other rule already says the gain is ordinary income. If you sell such land for a loss, that loss counts as a long-term capital loss. Converted wetland: land made into wetland as defined in the Food Security Act of 1985, when held by the person who caused the change or by anyone who farmed it. Highly erodible cropland: land called highly erodible under the Food Security Act of 1985, if the taxpayer ever used it for farming (not just grazing). If land is treated that way for one owner, it stays treated that way for later owners whose tax basis comes from the earlier owner. The Secretary will make rules like those for section 1245, and amounts treated as ordinary income here are handled the same as section 1245 for sections 170(e) and 751(c).