SECTION 1. QUALIFIED DISPOSITION OF DAIRY PROPERTY
TREATED AS INVOLUNTARY CONVERSION.
(a) IN GENERAL.—Section 1033 of the Internal Rev-
enue Code of 1986 (relating to involuntary conversions)
is amended by designating subsection (k) as subsection (l)
and inserting after subsection (j) the following new sub-
section:
‘‘(k) QUALIFIED DISPOSITION TO IMPLEMENT BO-
VINE TUBERCULOSIS ERADICATION PROGRAM.—
‘‘(1) IN GENERAL.—For purposes of this sub-
title, if a taxpayer elects the application of this sub-
section to a qualified disposition:
‘‘(A) TREATMENT AS INVOLUNTARY CON-
VERSION.—Such disposition shall be treated as
an involuntary conversion to which this section
applies.
‘‘(B) MODIFICATION
OF
SIMILAR
PROP-
ERTY REQUIREMENT.—Property to be held by
the taxpayer either for productive use in a trade
or business or for investment shall be treated as
property similar or related in service or use to
the property disposed of.
‘‘(C) EXTENSION OF PERIOD FOR REPLAC-
ING PROPERTY.—Subsection (a)(2)(B)(i) shall
be applied by substituting ‘4 years’ for ‘2
years’.
‘‘(D) WAIVER OF UNRELATED PERSON RE-
QUIREMENT.—Subsection (i) (relating to re-
placement property must be acquired from un-
related person in certain cases) shall not apply.
‘‘(E) EXPANDED CAPITAL GAIN FOR CAT-
TLE AND HORSES.—Section 1231(b)(3)(A) shall
be applied by substituting ‘1 month’ for ‘24
months’.
‘‘(2) QUALIFIED DISPOSITION.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified disposition’
means the disposition of dairy property which is
certified by the Secretary of Agriculture as hav-
ing been the subject of an agreement under the
bovine tuberculosis eradication program, as im-
plemented pursuant to the Declaration of
Emergency Because of Bovine Tuberculosis (65
Federal Register 63,227 (2000)).
‘‘(B) PAYMENTS
RECEIVED
IN
CONNEC-
TION WITH THE BOVINE TUBERCULOSIS ERADI-
CATION PROGRAM.—For purposes of this sub-
section, any amount received by a taxpayer in
connection with an agreement under such bo-
vine tuberculosis eradication program shall be
treated as received in a qualified disposition.
‘‘(C) TRANSMITTAL OF CERTIFICATIONS.—
The Secretary of Agriculture shall transmit
copies of certifications under this paragraph to
the Secretary.
‘‘(3) ALLOWANCE OF THE ADJUSTED BASIS OF
CERTIFIED
DAIRY
PROPERTY
AS
A
DEPRECIATION
DEDUCTION.—The adjusted basis of any property
certified under paragraph (2)(A) shall be allowed as
a depreciation deduction under section 167 for the
taxable year which includes the date of the certifi-
cation described in paragraph (2)(A).
‘‘(4) DAIRY PROPERTY.—For purposes of this
subsection, the term ‘dairy property’ means all tan-
gible property used in connection with a dairy busi-
ness or a dairy processing plant.
‘‘(5) SPECIAL RULES FOR CERTAIN BUSINESS
ORGANIZATIONS.—
‘‘(A) S CORPORATIONS.—In the case of an
S corporation, gain on a qualified disposition
shall not be treated as recognized for the pur-
poses of section 1374 (relating to tax imposed
on certain built-in gains).
‘‘(B) PARTNERSHIPS.—In the case of a
partnership which dissolves in anticipation of a
qualified disposition (including in anticipation
of receiving the amount described in paragraph
(2)(B)), the dairy property owned by the part-
ners of such partnership at the time of such
disposition shall be treated, for the purposes of
this section and notwithstanding any regulation
or rule of law, as owned by such partners at the
time of such disposition.
‘‘(6) TERMINATION.—This subsection shall not
apply to dispositions made after December 31,
2005.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to dispositions made and amounts
received in taxable years ending after May 22, 2001.
SEC. 2. DEDUCTION OF QUALIFIED RECLAMATION EXPEND-
ITURES.
(a) IN GENERAL.—Part VI of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
itemized deductions for individuals and corporations) is
amended by adding at the end the following new section:
‘‘SEC. 199. EXPENSING OF DAIRY PROPERTY RECLAMATION
COSTS.
‘‘(a) IN GENERAL.—Notwithstanding section 280B
(relating to demolition of structures), a taxpayer may elect
to treat any qualified reclamation expenditure which is
paid or incurred by the taxpayer as an expense which is
not chargeable to capital account. Any expenditure which
is so treated shall be allowed as a deduction for the taxable
year in which it is paid or incurred.
‘‘(b) QUALIFIED RECLAMATION EXPENDITURE.—
‘‘(1) IN GENERAL.—For purposes of this sub-
paragraph, the term ‘qualified reclamation expendi-
ture’ means amounts otherwise chargeable to capital
account and paid or incurred to convert any real
property certified under section 1033(k)(2) (relating
to qualified disposition) into unimproved land.
‘‘(2) SPECIAL RULE FOR EXPENDITURES FOR
DEPRECIABLE
PROPERTY.—A rule similar to the
rule of section 198(b)(2) (relating to special rule for
expenditures for depreciable property) shall apply for
purposes of paragraph (1).
‘‘(c) DEDUCTION RECAPTURED AS ORDINARY IN-
COME.—Rules similar to the rules of section 198(e) (relat-
ing to deduction recaptured as ordinary income on sale,
etc.) shall apply with respect to any qualified reclamation
expenditure.
‘‘(d) TERMINATION.—This section shall not apply to
expenditures paid or incurred after December 31, 2005.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part VI of subchapter B of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the end
the following new item:
‘‘Sec. 199. Expensing of dairy property reclamation costs.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenditures paid or incurred
in taxable years ending after May 22, 2001.
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