A bill to 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.
A bill to 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.
Plain Language Summary
# Summary of S. 930 - Farmland Capital Gains Tax Exclusion **What the Bill Does:** This bill would allow farmers and farmland sellers to avoid paying federal capital gains taxes on the sale of farmland if they reinvest the proceeds into an Individual Retirement Account (IRA) within 60 days. Normally, when someone sells property for a profit, that profit is taxed as a capital gain. This bill creates an exception for farmland sales under specific conditions. **Who It Affects and Key Conditions:** The benefit applies when farmland is sold to someone actively engaged in farming, and the seller puts the sale proceeds into an IRA. However, there are important safeguards: the buyer must sign a written agreement committing to keep the property used for farming for at least 10 years, or face a federal tax penalty.
The bill defines qualifying farmland as U.S. real property used primarily for farming purposes for at least the preceding 10 years. **Current Status:** The bill is currently in committee review (S. 930, introduced in the 119th Congress by Senator Mitch McConnell of Kentucky). It has not yet been voted on by the full Senate. Like all bills at this stage, it would need committee approval and passage through both chambers of Congress to become law.
CRS Official Summary
This bill excludes from gross income the gain from the sale or exchange of qualified farmland property to a qualified farmer that is contributed to an individual retirement account (IRA). This generally prevents the federal capital gains tax from being imposed on such gain. (Conditions apply.)Specifically, the bill excludes from gross income any gain from the sale or exchange of qualified farmland property contributed to an IRA within 60 days of the sale or exchange if the requisite election is made,the property is sold to an individual actively engaged in farming (qualified farmer),the qualified farmer signs a written agreement consenting to the application of a federal tax if the property is disposed of or no longer used for farming within the first 10 years after the sale or exchange, andthe written agreement is filed.The bill defines qualified farmland property as real property located in the United States that, for substantially all of the 10 years preceding the sale or exchange, is used by the farmer (or lessee) for farming purposes.However, under the bill, if the qualified farmland property is disposed of or no longer used for farming within the first 10 years after the sale or exchange, a tax is imposed on the qualified farmer equal to the amount excluded from gross income multiplied by the sum of the highest tax rate on adjusted net capital gains and the net investment income tax rate (currently 23.8%), plus interest.
Latest Action
Read twice and referred to the Committee on Finance.