I 
108TH CONGRESS 
1ST SESSION H. R. 2978
To amend the Internal Revenue Code of 1986 to provide an exclusion for 
gain from the sale of farmland to encourage the continued use of the 
property for farming, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 25, 2003
Mr. TERRY (for himself and Mr. POMEROY) 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 provide 
an exclusion for gain from the sale of farmland to en-
courage the continued use of the property for farming, 
and for other purposes.
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 ‘‘Beginning Farmers 
and Ranchers Tax Incentive Act of 2003’’.
SEC. 2. EXCLUSION OF GAIN FROM SALE OF CERTAIN 
FARMLAND. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
items specifically excluded from gross income) is amended 
by adding after section 121 the following new section: 
‘‘SEC. 121A. EXCLUSION OF GAIN FROM SALE OF QUALIFIED 
FARM PROPERTY. 
‘‘(a) EXCLUSION.—In the case of a natural person, 
gross income shall not include—
‘‘(1) 100 percent of the gain from the sale or 
exchange of qualified farm property to a first-time 
farmer (as defined in section 147(c)(2)(C) (deter-
mined without regard to clause (i)(II) thereof)) who 
certifies that the use of such property shall be as a 
farm for farming purposes for not less than 10 years 
after such sale or exchange, 
‘‘(2) 50 percent of the gain from the sale or ex-
change of qualified farm property to any other per-
son who certifies that the use of such property shall 
be as a farm for farming purposes for not less than 
10 years after such sale or exchange, and 
‘‘(3) 25 percent of the gain from the sale or ex-
change of qualified farm property to any other per-
son for any other use. 
‘‘(b) LIMITATION ON AMOUNT OF EXCLUSION.—
‘‘(1) IN GENERAL.—The amount of gain ex-
cluded from gross income under subsection (a) with 
respect to any taxable year shall not exceed 
$500,000 ($250,000 in the case of a married indi-
vidual filing a separate return), reduced by the ag-
gregate amount of gain excluded under subsection 
(a) for all preceding taxable years. 
‘‘(2) SPECIAL RULE FOR JOINT RETURNS.—The 
amount of the exclusion under subsection (a) on a 
joint return for any taxable year shall be allocated 
equally between the spouses for purposes of applying 
the limitation under paragraph (1) for any suc-
ceeding taxable year. 
‘‘(c) QUALIFIED FARM PROPERTY.—
‘‘(1) QUALIFIED
FARM
PROPERTY.—For pur-
poses of this section, the term ‘qualified farm prop-
erty’ means real property located in the United 
States if, during periods aggregating 3 years or 
more of the 5-year period ending on the date of the 
sale or exchange of such real property—
‘‘(A) such real property was used as a 
farm for farming purposes by the taxpayer or 
a member of the family of the taxpayer, and
‘‘(B) there was material participation by 
the taxpayer (or such a member) in the oper-
ation of the farm. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘member of the family’, ‘farm’, 
and ‘farming purposes’ have the respective meanings 
given such terms by paragraphs (2), (4), and (5) of 
section 2032A(e). 
‘‘(3) SPECIAL
RULES.—For purposes of this 
section, rules similar to the rules of paragraphs (4) 
and (5) of section 2032A(b) and paragraphs (3) and 
(6) of section 2032A(e) shall apply. 
‘‘(d) OTHER RULES.—For purposes of this section, 
rules similar to the rules of subsection (e) and subsection 
(f) of section 121 shall apply. 
‘‘(e) TREATMENT OF DISPOSITION OR CHANGE IN 
USE OF PROPERTY.—
‘‘(1) IN GENERAL.—If, as of the close of any 
taxable year, there is a recapture event with respect 
to any qualified farm property transferred to the 
taxpayer in a sale or exchange described in para-
graph (1) or (2) of subsection (a), then the tax of 
the taxpayer under this chapter for such taxable 
year shall be increased by an amount equal to the 
product of—