II

106TH CONGRESS

1ST SESSION S. 317

To amend the Internal Revenue Code of 1986 to provide an exclusion for

gain from the sale of farmland which is similar to the exclusion from

gain on the sale of a principal residence.

IN THE SENATE OF THE UNITED STATES

JANUARY 28, 1999

Mr. DORGAN (for himself and Mr. HAGEL) 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

an exclusion for gain from the sale of farmland which

is similar to the exclusion from gain on the sale of

a principal residence.

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

3 SECTION 1. EXCLUSION OF GAIN FROM SALE OF CERTAIN

4 FARMLAND.

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to

7 items specifically excluded from gross income) is amended

8 by adding after section 121 the following new section:
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1 ‘‘SEC. 121A. EXCLUSION OF GAIN FROM SALE OF QUALIFIED

2 FARM PROPERTY.

3 ‘‘(a) EXCLUSION.—In the case of a natural person,

4 gross income shall not include gain from the sale or ex5 change of qualified farm property.

6 ‘‘(b) LIMITATION ON AMOUNT OF EXCLUSION.—

7 ‘‘(1) IN GENERAL.—The amount of gain ex8 cluded from gross income under subsection (a) with

9 respect to any taxable year shall not exceed

10 $500,000 ($250,000 in the case of a married indi11 vidual filing a separate return), reduced by the ag12 gregate amount of gain excluded under subsection

13 (a) for all preceding taxable years.

14 ‘‘(2) SPECIAL RULE FOR JOINT RETURNS.—The

15 amount of the exclusion under subsection (a) on a

16 joint return for any taxable year shall be allocated

17 equally between the spouses for purposes of applying

18 the limitation under paragraph (1) for any succeed19 ing taxable year.

20 ‘‘(c) QUALIFIED FARM PROPERTY.—

21 ‘‘(1) QUALIFIED FARM PROPERTY.—For pur22 poses of this section, the term ‘qualified farm prop23 erty’ means real property located in the United

24 States if, during periods aggregating 3 years or

25 more of the 5-year period ending on the date of the

26 sale or exchange of such real property—
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1 ‘‘(A) such real property was used as a

2 farm for farming purposes by the taxpayer or

3 a member of the family of the taxpayer, and

4 ‘‘(B) there was material participation by

5 the taxpayer (or such a member) in the oper6 ation of the farm.

7 ‘‘(2) DEFINITIONS.—For purposes of this sub8 section, the terms ‘member of the family’, ‘farm’,

9 and ‘farming purposes’ have the respective meanings

10 given such terms by paragraphs (2), (4), and (5) of

11 section 2032A(e).

12 ‘‘(3) SPECIAL RULES.—For purposes of this

13 section, rules similar to the rules of paragraphs (4)

14 and (5) of section 2032A(b) and paragraphs (3) and

15 (6) of section 2032A(e) shall apply.

16 ‘‘(d) OTHER RULES.—For purposes of this section,

17 rules similar to the rules of subsection (e) and subsection

18 (f) of section 121 shall apply.’’

19 (b) CONFORMING AMENDMENT.—The table of sec20 tions for part III of subchapter B of chapter 1 of the In21 ternal Revenue Code of 1986 is amended by adding after

22 the item relating to section 121 the following new item:

‘‘Sec. 121A. Exclusion of gain from sale of qualified farm property.’’
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1 (c) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to any sale or exchange on or after

3 May 7, 1997, in taxable years ending after such date.

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