I
104TH CONGRESS
1ST SESSION
H. R. 2676
To amend the Internal Revenue Code of 1986 to provide for the nonrecogni-
tion of gain for sale of stock to certain farmers’ cooperatives, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 20, 1995
Mr. ROBERTS (for himself, Mr. STENHOLM, Mrs. CHENOWETH, Mr. MINGE,
Mr. PETERSON of Minnesota, Mr. POMEROY, and Mr. CRAPO) 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
for the nonrecognition of gain for sale of stock to certain
farmers’ cooperatives, 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. NONRECOGNITION OF GAIN ON SALE OF STOCK
TO CERTAIN FARMERS’ COOPERATIVES.
(a) APPLICATION OF SECTION 1042 TO CERTAIN
FARMERS’ COOPERATIVES.—Section 1042 of the Internal
Revenue Code of 1986 (relating to sales of stock to em-
ployee stock ownership plans or certain cooperatives) is
amended by adding at the end the following new sub-
section:
‘‘(g) APPLICATION OF SECTION TO SALES OF STOCK
IN AGRICULTURAL REFINERS AND PROCESSORS TO ELI-
GIBLE FARM COOPERATIVES.—
‘‘(1) IN GENERAL.—This section shall apply to
the sale of stock of a qualified refiner or processor
to an eligible farmers’ cooperative.
‘‘(2) QUALIFIED REFINER OR PROCESSOR.—For
purposes of this subsection, the term ‘qualified re-
finer or processor’ means a domestic corporation—
‘‘(A) substantially all of the activities of
which consist of the active conduct of the trade
or business of refining or processing agricul-
tural or horticultural products, and
‘‘(B) which purchases more than one-half
of such products to be refined or processed
from farmers who make up the eligible farmers’
cooperative which is purchasing stock in the
corporation in a transaction to which this sub-
section is to apply.
‘‘(3) ELIGIBLE FARMERS’ COOPERATIVE.—For
purposes of this section, the term ‘eligible farmers’
cooperative’ means an organization to which part I
of subchapter T applies which is engaged in the
marketing of agricultural or horticultural products.
‘‘(4) SPECIAL RULES.—In applying this section
to a sale to which paragraph (1) applies—
‘‘(A) the eligible farmers’ cooperative shall
be treated in the same manner as a cooperative
described in subsection (b)(1)(B),
‘‘(B) the determination as to whether any
stock in the domestic corporation is a qualified
security shall be made without regard to wheth-
er the stock is an employer security or to sub-
section (c)(1)(A), and
‘‘(C) subsection (c)(7) shall not apply.’’
(b) COORDINATION WITH SECTION 338(h)(10).—
Section 338(h)(10) of the Internal Revenue Code of 1986
is amended by adding at the end the following new sub-
paragraph:
‘‘(D) 
COORDINATION
WITH
SECTION
1042.—An election may be made under this
paragraph with respect to a sale described in
section 1042(g) for which an election was made
under section 1042(a), except that no gain shall
be recognized by reason of subparagraph (A)(ii)
to the extent it is not recognized under section
1042(a).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to sales after the date of the enact-
ment of this Act.
Æ