I 
109TH CONGRESS 
2D SESSION 
H. R. 5892 
To amend the Internal Revenue Code of 1986 to provide special rules for 
the exchange or installment sale of certain agricultural property. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 26, 2006 
Mr. ADERHOLT 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 
special rules for the exchange or installment sale of cer-
tain agricultural property. 
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 ‘‘Farmers Tax Deferral 
Act’’. 
SEC. 2. NONTAXABLE EXCHANGE OF QUALIFIED AGRICUL-
TURAL PROPERTY FOR REAL PROPERTY. 
(a) IN GENERAL.—Part III of subchapter O of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to 
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common nontaxable exchanges) is amended by adding at 
the end the following new section: 
‘‘SEC. 1046. EXCHANGE OF QUALIFIED AGRICULTURAL 
PROPERTY FOR REAL PROPERTY. 
‘‘(a) IN GENERAL.—No gain or loss shall be recog-
nized to a qualified person on the receipt of United States 
real property in exchange for any qualified agricultural 
property. 
‘‘(b) QUALIFIED PERSON.—For purposes of this sec-
tion, the term ‘qualified person’ means— 
‘‘(1) any individual who has attained age 55 as 
of the date that such real property is received, 
‘‘(2) any corporation if all of the outstanding 
stock of such corporation is owned by one or more 
individuals described in paragraph (1), and 
‘‘(3) any partnership, trust, or estate if all of 
the beneficial interests in such partnership, trust, or 
estate are owned by one or more individuals de-
scribed in paragraph (1). 
‘‘(c) QUALIFIED AGRICULTURAL PROPERTY.—The 
term ‘qualified agricultural property’ means— 
‘‘(1) any single purpose agricultural or horti-
cultural structure (as defined in section 168(i)(13)) 
which was placed in service by the taxpayer more 
than 20 years before the date that such structure is 
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transferred in the exchange described in subsection 
(a), and 
‘‘(2) any real property, equipment, or fixtures 
which are related in use to such structure. 
‘‘(d) UNITED STATES REAL PROPERTY.—For pur-
poses of this section, the term ‘United States real prop-
erty’ means real property located in the United States. 
‘‘(e) REQUIREMENT THAT PROPERTY BE IDENTI-
FIED AND THAT EXCHANGE BE COMPLETED NOT MORE 
THAN 180 DAYS AFTER TRANSFER
OF EXCHANGED 
PROPERTY.—For purposes of this section, any property 
received by the taxpayer shall be treated as property which 
is not real property if— 
‘‘(1) such property is not identified as property 
to be received in the exchange on or before the day 
which is 45 days after the date on which the tax-
payer transfers the property relinquished in the ex-
change, or 
‘‘(2) such property is received after the earlier 
of— 
‘‘(A) the day which is 180 days after the 
date on which the taxpayer transfers the prop-
erty relinquished in the exchange, or 
‘‘(B) the due date (determined with regard 
to extension) for the transferor’s return of the 
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tax imposed by this chapter for the taxable year 
in which the transfer of the relinquished prop-
erty occurs. 
‘‘(f) APPLICATION OF RULES REGARDING BASIS, EX-
CHANGES NOT SOLELY IN KIND, AND RELATED PAR-
TIES.—Rules similar to the rules of subsections (b), (c), 
(d), (f), and (g) of section 1031 shall apply for purposes 
of this section. 
‘‘(g) TREATMENT AS SECTION 1031 EXCHANGE.— 
For purposes of this title (other than sections 1031 and 
1245), a transaction described in this section shall be 
treated in the same manner as a transaction described in 
section 1031.’’. 
(b) ORDINARY
INCOME
RECAPTURE
DEFERRED 
UNTIL DISPOSITION OF REAL PROPERTY ACQUIRED IN 
EXCHANGE.—Subsection (b) of section 1245 of such Code 
is amended by adding at the end the following new para-
graph: 
‘‘(9) SPECIAL
RULE
FOR
LIKE
KIND
EX-
CHANGES
OF
QUALIFIED
AGRICULTURAL
PROP-
ERTY.— 
‘‘(A) IN
GENERAL.—If qualified agricul-
tural property (as defined in section 1046(c)) is 
disposed of and gain (determined without re-
gard to this section) is not recognized in whole 
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or in part under section 1046, then the amount 
of gain taken into account by the transferor 
under subsection (a)(1) shall not exceed the 
sum of— 
‘‘(i) the amount of gain recognized on 
such disposition (determined without re-
gard to this section), plus 
‘‘(ii) the fair market value of property 
acquired which is not taken into account 
under clause (i) and which is not— 
‘‘(I) section 1245 property, or 
‘‘(II) United States real property. 
‘‘(B) ORDINARY INCOME RECAPTURE ON 
DISPOSITION OF REAL PROPERTY ACQUIRED IN 
EXCHANGE.—If United States real property ac-
quired in an exchange to which section 1046 
applies is disposed of by the transferee, the 
lesser of— 
‘‘(i) the excess of— 
‘‘(I) the amount realized on the 
disposition of such real property (in 
the case of a disposition other than a 
sale, exchange, or involuntary conver-
sion, the fair market value of such 
real property), over 
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‘‘(II) the adjusted basis of such 
real property, or 
‘‘(ii) the excess of— 
‘‘(I) the amount of gain that 
would have been treated as ordinary 
income under this section if such 
qualified agricultural property were 
sold at fair market value on the date 
of the disposition of such qualified ag-
ricultural property, over 
‘‘(II) the amount of gain recog-
nized as ordinary income under this 
subparagraph with respect to such 
qualified agricultural property on the 
disposition of any other real property, 
shall be treated as ordinary income. Such gain shall 
be recognized notwithstanding any other provision of 
this subtitle.’’. 
(c) EFFECTIVE DATE.— 
(1) SUBSECTION (a).—The amendments made 
by subsection (a) shall apply to transfers after the 
date of the enactment of this Act. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall apply to dispositions after the 
date of the enactment of this Act. 
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SEC. 3. SPECIAL RULES FOR INSTALLMENT SALES OF 
QUALIFIED AGRICULTURAL PROPERTY. 
(a) IN GENERAL.—Subsection (i) of section 453 of 
the Internal Revenue Code of 1986 is amended by redesig-
nating paragraph (2) as paragraph (3) and by inserting 
after paragraph (1) the following new paragraph: 
‘‘(2) SPECIAL RULE FOR QUALIFIED AGRICUL-
TURAL PROPERTY.—Notwithstanding paragraph (1), 
in the case of any installment sale of qualified agri-
cultural property (as defined in section 1046(c), ap-
plied by substituting ‘the installment sale described 
in section 453(i)(2)’ for ‘the exchange described in 
subsection (a)’ in paragraph (1) thereof) to which 
subsection (a) applies— 
‘‘(A) income from the installment sale shall 
be taken into account under the installment 
method, and 
‘‘(B) income recognized for any taxable 
year from such sale under such method shall be 
recognized as recapture income in such year in 
the same proportion to such income recognized 
for such year from such sale as— 
‘‘(i) the aggregate recapture income 
from such sale (recognized or to be recog-
nized when payment is completed), bears 
to 
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‘‘(ii) the aggregate income from such 
sale (so recognized or to be recognized).’’. 
(b) CONFORMING AMENDMENT.—Paragraph (3) of 
section 453(i) of such Code, as redesignated under this 
section, is amended by striking ‘‘paragraph (1)’’ and in-
serting ‘‘this subsection’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales after the date of the enact-
ment of this Act. 
Æ 
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