To amend the Internal Revenue Code of 1986 to provide involuntary conversion tax relief for producers forced to sell livestock due to weather-related conditions or Federal land management agency policy or action, and for other purposes.

Summary: Livestock Reinvestment Extension Act of 2002 - Amends the Internal Revenue Code to allow farmers to delay the inclusion in income of the amount earned from the sale of excess livestock due to Federal land management policy or action or to severe weather conditions until the second year following the year in which the special circumstance ceased to exist.(present law allows for inclusion of such income in the year following a year of severe weather).Sets forth new rules for drought designations. Modifies rules for replacement of involuntarily converted livestock, including to extend the replacement period (for both weather-related sales and sales forced by Federal policy) and to prescribe that an heir to an estate may replace such property within the required time frame.Applies this Act to sales and exchanges made after December 31, 2000.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Livestock Reinvestment Extension Act 
of 2002''.

SEC. 2. INVOLUNTARY CONVERSION RELIEF FOR PRODUCERS FORCED TO SELL 
              LIVESTOCK DUE TO WEATHER-RELATED CONDITIONS OR FEDERAL 
              LAND MANAGEMENT AGENCY POLICY OR ACTION.

    (a) Income Inclusion Rules.--Subsection (e) of section 451 of the 
Internal Revenue Code of 1986 (relating to general rule for taxable 
year of inclusion) is amended to read as follows:
    ``(e) Special Rule for Proceeds From Livestock Sold on Account of 
Weather-Related Conditions or Federal Land Management Agency Policy or 
Action.--
            ``(1) In general.--If--
                    ``(A) a taxpayer sells or exchanges livestock in 
                excess of the number the taxpayer would sell if he 
                followed his usual business practices, and
                    ``(B) the taxpayer establishes that, under his 
                usual business practices, the sale or exchange would 
                not have occurred in the taxable year in which it 
                occurred if it were not for--
                            ``(i) a drought, flood, or other weather-
                        related condition that resulted in the area 
                        being designated as eligible for assistance by 
                        the Federal Government, or
                            ``(ii) forced sales resulting from Federal 
                        land management agency policy or action,
        the taxpayer may elect to include income from such excess sales 
        or exchanges for the second taxable year following the taxable 
        year in which the circumstance applicable under subparagraph 
        (B) ceased to exist.
            ``(2) Limitation.--Paragraph (1) shall apply only to a 
        taxpayer whose principal trade or business is farming (within 
        the meaning of section 6420(c)(3)).
            ``(3) Special rules for drought designations.--For purposes 
        of this subsection, areas may be designated as eligible for 
        drought condition assistance--
                    ``(A) by Federal Government declaration, or
                    ``(B) through Farm Service Agency flash reports as 
                verified and approved by the Farm Service Agency 
                director of the State in which such condition 
                exists.''.
    (b) Rules for Replacement of Involuntarily Converted Livestock.--
Subsection (e) of section 1033 of such Code (relating to involuntary 
conversions) is amended to read as follows:
    ``(e) Livestock Sold on Account of Weather-Related Conditions or 
Federal Land Management Agency Policy or Action.--
            ``(1) In general.--For purposes of this subtitle, the sale 
        or exchange of livestock (other than poultry) by the taxpayer 
        in excess of the number the taxpayer would sell if he followed 
        usual business practices, shall be treated as an involuntary 
        conversion to which this section applies if such livestock are 
        sold or exchanged by the taxpayer solely on account of--
                    ``(A) drought, flood, or other weather-related 
                conditions, or
                    ``(B) forced sales caused by Federal land 
                management agency policy or action.
            ``(2) Extension of replacement period.--
                    ``(A) Droughts, etc.--In a case to which paragraph 
                (1)(A) applies, the 2-year period in subsection 
                (a)(2)(B) shall not expire before the later of--
                            ``(i) 4 years after the close of the first 
                        taxable year in which any part of the gain upon 
                        the conversion is realized, or
                            ``(ii) 2 years after the close of the 
                        taxable year in which the drought, flood, or 
                        other weather-related condition ceased to 
                        exist.
                    ``(B) Forced sales.--In a case to which paragraph 
                (1)(B) applies, the 2-year period in subsection 
                (a)(2)(B) shall not expire before 2 years after the 
                close of the taxable year in which the forced sales 
                resulting from Federal land management agency policy or 
                action have ended.''.
            (3) Conversion by heirs.--Section 1033(a)(2) of such Code 
        is amended by adding at the end the following new subparagraph:
                    ``(F) Conversion of certain property by heirs.--In 
                the case of an involuntary conversion of property 
                described in subsection (e), if the taxpayer dies 
                during the period specified in subparagraph (B), the 
                requirements of subparagraph (A) shall be satisfied if 
                the decedent's--
                            ``(i) personal representative,
                            ``(ii) the beneficiary of the converted 
                        property, if no personal representative exists, 
                        or
                            ``(iii) the trustee in the case of a trust,
                replaces the property within such period.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales and exchanges after December 31, 2000.