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107TH CONGRESS
1ST SESSION
H. R. 1179
To amend the Internal Revenue Code of 1986 to exclude from gross income
gain on the sale of a family farming business to a family member.
IN THE HOUSE OF REPRESENTATIVES
MARCH 22, 2001
Mr. GREEN of Wisconsin (for himself, Mr. PETRI, Mr. BAKER, Mr. JOHNSON
of Illinois, Mr. WELDON
of Pennsylvania, Mr. SCHAFFER, Mr.
HOSTETTLER, Mr. GILMAN, Mr. ISTOOK, Mr. BURTON of Indiana, Mr.
BARTON of Texas, Mr. HILLEARY, Mr. SHOWS, Mr. MCHUGH, Ms.
HART, Mr. SWEENEY, Mr. POMBO, Mr. RYUN
of Kansas, Mr.
NETHERCUTT, Mr. TERRY, Mr. HASTINGS of Washington, Mr. SENSEN-
BRENNER, Mr. WELLER, Mr. SKEEN, Mr. KENNEDY of Minnesota, Mr.
POMEROY, and Mr. FLETCHER) introduced the following bill; which was
referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to exclude
from gross income gain on the sale of a family farming
business to a family member.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Family Farm Protec-
tion Act’’.
HR 1179 IH1S
SEC. 2. EXCLUSION OF GAIN ON SALE OF FAMILY FARMING
BUSINESS TO FAMILY MEMBER.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 of the Internal Revenue Code of 1986 (relating to treat-
ment of capital gains) is amended by adding at the end
the following new section:
‘‘SEC. 1203. EXCLUSION OF GAIN ON SALE OF FAMILY FARM
TO FAMILY MEMBER.
‘‘(a) IN GENERAL.—At the election of the taxpayer,
gross income shall not include any gain from the sale of
a qualified family farm interest to a member of the tax-
payer’s family if—
‘‘(1) at all times during the 5-year period end-
ing on the date of such sale, there was material par-
ticipation by the taxpayer or a member of the tax-
payer’s family in the operation of the farming busi-
ness to which such interest relates, and
‘‘(2)(A) such interest is being acquired by a
member of the taxpayer’s family, and
‘‘(B) such member agrees—
‘‘(i) for the 5-year period beginning on the
day after the date of such sale, to materially
participate in the operation of the farming busi-
ness to which such interest relates, and
‘‘(ii) to the provisions of subsection (b).
HR 1179 IH1S
‘‘(b) RECAPTURE OF TAX IF INTEREST CEASES TO
BE USED IN A FARMING BUSINESS.—
‘‘(1) IN GENERAL.—If, during any year within
the 5-year period beginning on the date of such
sale—
‘‘(A) a qualified family farm interest with
respect to which an election is made under sub-
section (a) is disposed of, or otherwise ceases to
be a qualified family farm interest of the mem-
ber of the family who acquired such interest,
other than through the bankruptcy or insol-
vency of such member of the family, or
‘‘(B) the member of the family who ac-
quired such interest fails to materially partici-
pate (directly or through a family member of
such member) in the operation of the farming
business to which such interest relates,
then the tax imposed on such member of the family
under this subtitle for the year shall be increased by
an amount equal to the recapture percentage of the
excluded tax amount, plus interest on the amount of
such increase at the underpayment rate established
under section 6621 for the period beginning on the
date the return of tax for the year of such sale was
due under this chapter (without regard to extensions