I 
109TH CONGRESS 
1ST SESSION 
H. R. 775
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 HOUSE OF REPRESENTATIVES 
FEBRUARY 10, 2005
Mr. OSBORNE (for himself, Mr. GREEN of Wisconsin, Mr. HOSTETTLER, Mr. 
PAUL, Mr. SKELTON, Mr. WAMP, and Mr. POMEROY) introduced the fol-
lowing 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 which 
is similar to the exclusion from gain on the sale of 
a principal residence.
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 ‘‘Farmland Capital 
Gains Equity Act of 2005’’.
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 gain from the sale or ex-
change of qualified farm property. 
‘‘(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.—For purposes of 
this section—
‘‘(1) IN GENERAL.—The term ‘qualified farm 
property’ 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 by the 
taxpayer or a member of the family of the tax-
payer as a farm for farming purposes, and 
‘‘(B) there was material participation by 
the taxpayer (or such a member) in the oper-
ation of the farm. 
‘‘(2) OTHER DEFINITIONS.—The terms ‘mem-
ber 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.—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 subsections (d), (e) and (f) 
of section 121 shall apply.’’.
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part III of subchapter B of chapter 1 of the In-
ternal Revenue Code of 1986 is amended by adding after 
the item relating to section 121 the following new item:
‘‘Sec. 121A. Exclusion of gain from sale of qualified farm property.’’.
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to any sale or exchange on or after 
December 31, 2004.
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