II

104TH CONGRESS

1ST SESSION S. 331

To amend the Internal Revenue Code of 1986 to provide for the rollover

of gain from the sale of farm assets into an individual retirement account.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 1 (legislative day, JANUARY 30), 1995

Mr. KOHL introduced the following bill; which was read twice and referred to

the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the rollover of gain from the sale of farm assets

into an individual retirement account.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; REFERENCE TO INTERNAL REV4 ENUE CODE.

5 (a) SHORT TITLE.—This Act may be cited as the

6 ‘‘Family Farm Retirement Equity Act of 1995’’.

7 (b) REFERENCE TO INTERNAL REVENUE CODE OF

8 1986.—Except as otherwise expressly provided, whenever

9 in this Act an amendment or repeal is expressed in terms

10 of an amendment to, or repeal of, a section or other provi-
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1 sion, the reference shall be considered to be made to a

2 section or other provision of the Internal Revenue Code

3 of 1986.

4 SEC. 2. ROLLOVER OF GAIN FROM SALE OF FARM ASSETS

5 TO INDIVIDUAL RETIREMENT PLANS.

6 (a) IN GENERAL.—Part III of subchapter O of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to

8 common nontaxable exchanges) is amended by inserting

9 after section 1034 the following new section:

10 ‘‘SEC. 1034A. ROLLOVER OF GAIN ON SALE OF FARM ASSETS

11 INTO ASSET ROLLOVER ACCOUNT.

12 ‘‘(a) NONRECOGNITION OF GAIN.—Subject to the

13 limits of subsection (c), if a taxpayer has a qualified net

14 farm gain from the sale of a qualified farm asset, then,

15 at the election of the taxpayer, gain (if any) from such

16 sale shall be recognized only to the extent such gain ex17 ceeds the contributions to 1 or more asset rollover ac18 counts of the taxpayer for the taxable year in which such

19 sale occurs.

20 ‘‘(b) ASSET ROLLOVER ACCOUNT.—

21 ‘‘(1) GENERAL RULE.—Except as provided in

22 this section, an asset rollover account shall be treat23 ed for purposes of this title in the same manner as

24 an individual retirement plan.
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1 ‘‘(2) ASSET ROLLOVER ACCOUNT.—For pur2 poses of this title, the term ‘asset rollover account’

3 means an individual retirement plan which is des4 ignated at the time of the establishment of the plan

5 as an asset rollover account. Such designation shall

6 be made in such manner as the Secretary may pre7 scribe.

8 ‘‘(c) CONTRIBUTION RULES.—

9 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

10 shall be allowed under section 219 for a contribution

11 to an asset rollover account.

12 ‘‘(2) AGGREGATE CONTRIBUTION LIMITA13 TION.—Except in the case of rollover contributions,

14 the aggregate amount for all taxable years which

15 may be contributed to all asset rollover accounts es16 tablished on behalf of an individual shall not ex17 ceed—

18 ‘‘(A) $500,000 ($250,000 in the case of a

19 separate return by a married individual), re20 duced by

21 ‘‘(B) the amount by which the aggregate

22 value of the assets held by the individual (and

23 spouse) in individual retirement plans (other

24 than asset rollover accounts) exceeds $100,000.
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1 The determination under subparagraph (B) shall be

2 made as of the close of the taxable year for which

3 the determination is being made.

4 ‘‘(3) ANNUAL CONTRIBUTION LIMITATIONS.—

5 ‘‘(A) GENERAL RULE.—The aggregate

6 contribution which may be made in any taxable

7 year to all asset rollover accounts shall not ex8 ceed the lesser of—

9 ‘‘(i) the qualified net farm gain for

10 the taxable year, or

11 ‘‘(ii) an amount determined by mul12 tiplying the number of years the taxpayer

13 is a qualified farmer by $10,000.

14 ‘‘(B) SPOUSE.—In the case of a married

15 couple filing a joint return under section 6013

16 for the taxable year, subparagraph (A) shall be

17 applied by substituting ‘$20,000’ for ‘$10,000’

18 for each year the taxpayer’s spouse is a quali19 fied farmer.

20 ‘‘(4) TIME WHEN CONTRIBUTION DEEMED

21 MADE.—For purposes of this section, a taxpayer

22 shall be deemed to have made a contribution to an

23 asset rollover account on the last day of the preced24 ing taxable year if the contribution is made on ac25 count of such taxable year and is made not later
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1 than the time prescribed by law for filing the return

2 for such taxable year (not including extensions

3 thereof).

4 ‘‘(d) QUALIFIED NET FARM GAIN; ETC.—For pur5 poses of this section—

6 ‘‘(1) QUALIFIED NET FARM GAIN.—The term

7 ‘qualified net farm gain’ means the lesser of—

8 ‘‘(A) the net capital gain of the taxpayer

9 for the taxable year, or

10 ‘‘(B) the net capital gain for the taxable

11 year determined by only taking into account

12 gain (or loss) in connection with a disposition

13 of a qualified farm asset.

14 ‘‘(2) QUALIFIED FARM ASSET.—The term

15 ‘qualified farm asset’ means an asset used by a

16 qualified farmer in the active conduct of the trade

17 or business of farming (as defined in section

18 2032A(e)).

19 ‘‘(3) QUALIFIED FARMER.—

20 ‘‘(A) IN GENERAL.—The term ‘qualified

21 farmer’ means a taxpayer who—

22 ‘‘(i) during the 5-year period ending

23 on the date of the disposition of a qualified

24 farm asset materially participated in the

25 trade or business of farming, and
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1 ‘‘(ii) owned (or who with the tax2 payer’s spouse owned) 50 percent or more

3 of such trade or business during such 5-

4 year period.

5 ‘‘(B) MATERIAL PARTICIPATION.—For

6 purposes of this paragraph, a taxpayer shall be

7 treated as materially participating in a trade or

8 business if the taxpayer meets the requirements

9 of section 2032A(e)(6).

10 ‘‘(4) ROLLOVER CONTRIBUTIONS.—Rollover

11 contributions to an asset rollover account may be

12 made only from other asset rollover accounts.

13 ‘‘(e) DISTRIBUTION RULES.—For purposes of this

14 title, the rules of paragraphs (1) and (2) of section 408(d)

15 shall apply to any distribution from an asset rollover

16 account.

17 ‘‘(f) INDIVIDUAL REQUIRED TO REPORT QUALIFIED

18 CONTRIBUTIONS.—

19 ‘‘(1) IN GENERAL.—Any individual who—

20 ‘‘(A) makes a contribution to any asset

21 rollover account for any taxable year, or

22 ‘‘(B) receives any amount from any asset

23 rollover account for any taxable year,

24 shall include on the return of tax imposed by chap25 ter 1 for such taxable year and any succeeding tax-
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1 able year (or on such other form as the Secretary

2 may prescribe) information described in paragraph

3 (2).

4 ‘‘(2) INFORMATION REQUIRED TO BE SUP5 PLIED.—The information described in this para6 graph is information required by the Secretary

7 which is similar to the information described in sec8 tion 408(o)(4)(B).

9 ‘‘(3) PENALTIES.—For penalties relating to re10 ports under this paragraph, see section 6693(b).’’.

11 (b) CONTRIBUTIONS NOT DEDUCTIBLE.—Section

12 219(d) of the Internal Revenue Code of 1986 (relating to

13 other limitations and restrictions) is amended by adding

14 at the end the following new paragraph:

15 ‘‘(5) CONTRIBUTIONS TO ASSET ROLLOVER AC16 COUNTS.—No deduction shall be allowed under this

17 section with respect to a contribution under section

18 1034A.’’.

19 (c) EXCESS CONTRIBUTIONS.—

20 (1) IN GENERAL.—Section 4973 of the Internal

21 Revenue Code of 1986 (relating to tax on excess

22 contributions to individual retirement accounts, cer23 tain section 403(b) contracts, and certain individual

24 retirement annuities) is amended by adding at the

25 end the following new subsection:
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1 ‘‘(d) ASSET ROLLOVER ACCOUNTS.—For purposes of

2 this section, in the case of an asset rollover account re3 ferred to in subsection (a)(1), the term ‘excess contribu4 tion’ means the excess (if any) of the amount contributed

5 for the taxable year to such account over the amount

6 which may be contributed under section 1034A.’’.

7 (2) CONFORMING AMENDMENTS.—

8 (A) Section 4973(a)(1) of such Code is

9 amended by striking ‘‘or’’ and inserting ‘‘an

10 asset rollover account (within the meaning of

11 section 1034A), or’’.

12 (B) The heading for section 4973 of such

13 Code is amended by inserting ‘‘ASSET ROLL14 OVER ACCOUNTS,’’ after ‘‘CONTRACTS’’.

15 (C) The table of sections for chapter 43 of

16 such Code is amended by inserting ‘‘asset roll17 over accounts,’’ after ‘‘contracts’’ in the item

18 relating to section 4973.

19 (d) TECHNICAL AMENDMENTS.—

20 (1) Paragraph (1) of section 408(a) of the In21 ternal Revenue Code of 1986 (defining individual re22 tirement account) is amended by inserting ‘‘or a

23 qualified contribution under section 1034A,’’ before

24 ‘‘no contribution’’.
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1 (2) Subparagraph (A) of section 408(d)(5) of

2 such Code is amended by inserting ‘‘or qualified con3 tributions under section 1034A’’ after ‘‘rollover con4 tributions’’.

5 (3)(A) Subparagraph (A) of section 6693(b)(1)

6 of such Code is amended by inserting ‘‘or

7 1034A(f)(1)’’ after ‘‘408(o)(4)’’.

8 (B) Section 6693(b)(2) of such Code is amend9 ed by inserting ‘‘or 1034A(f)(1)’’ after ‘‘408(o)(4)’’.

10 (4) The table of sections for part III of sub11 chapter O of chapter 1 of such Code is amended by

12 inserting after the item relating to section 1034 the

13 following new item:

‘‘Sec. 1034A. Rollover of gain on sale of farm assets into asset

rollover account.’’.

14 (e) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to sales and exchanges after the

16 date of the enactment of this Act.

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