‘‘(5) TRANSFER OF ACCOUNT INCIDENT TO DI-
VORCE.—The transfer of an individual’s interest in 
a farm risk management account to an individual’s 
spouse or former spouse under a divorce or separa-
tion instrument described in subparagraph (A) of 
section 71(b)(2) shall not be considered a taxable 
transfer made by such individual notwithstanding 
any other provision of this subtitle, and such interest 
shall, after such transfer, be treated as a farm risk 
management account with respect to which such 
spouse is the account beneficiary. 
‘‘(6) TREATMENT AFTER DEATH OF ACCOUNT 
BENEFICIARY.— 
‘‘(A) TREATMENT IF DESIGNATED BENE-
FICIARY
IS
SPOUSE.—If the account bene-
ficiary’s surviving spouse acquires such bene-
ficiary’s interest in a farm risk management ac-
count by reason of being the designated bene-
ficiary of such account at the death of the ac-
count beneficiary, such farm risk management 
account shall be treated as if the spouse were 
the account beneficiary. 
‘‘(B) OTHER CASES.— 
‘‘(i) IN GENERAL.—If, by reason of 
the death of the account beneficiary, any 
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person acquires the account beneficiary’s 
interest in a farm risk management ac-
count in a case to which subparagraph (A) 
does not apply— 
‘‘(I) such account shall cease to 
be a farm risk management account 
as of the date of death, and 
‘‘(II) an amount equal to the fair 
market value of the assets in such ac-
count on such date shall be included 
if such person is not the estate of 
such beneficiary, in such person’s 
gross income for the taxable year 
which includes such date, or if such 
person is the estate of such bene-
ficiary, in such beneficiary’s gross in-
come for the last taxable year of such 
beneficiary. 
‘‘(ii) 
DEDUCTION
FOR
ESTATE 
TAXES.—An appropriate deduction shall be 
allowed under section 691(c) to any person 
(other than the decedent or the decedent’s 
spouse) with respect to amounts included 
in gross income under clause (i) by such 
person. 
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‘‘(i) REPORTS.—The Secretary may require the trust-
ee of a farm risk management account to make such re-
ports regarding such account to the Secretary and to the 
account beneficiary with respect to contributions, distribu-
tions, and such other matters as the Secretary determines 
appropriate. The reports required by this subsection shall 
be filed at such time and in such manner and furnished 
to such individuals at such time and in such manner as 
may be required by the Secretary.’’. 
(b) DEDUCTION ALLOWED WHETHER OR NOT INDI-
VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 
of section 62 of such Code is amended by inserting after 
paragraph (20) the following new paragraph: 
‘‘(21) FARM RISK MANAGEMENT ACCOUNTS.— 
The deduction allowed by section 224.’’. 
(c) TAX ON EXCESS CONTRIBUTIONS.—Section 4973 
of such Code (relating to tax on excess contributions to 
certain tax-favored accounts and annuities) is amended— 
(1) by striking ‘‘or’’ at the end of subsection 
(a)(4), by inserting ‘‘or’’ at the end of subsection 
(a)(5), and by inserting after subsection (a)(5) the 
following new paragraph: 
‘‘(6) a farm risk management account (within 
the meaning of section 224(e)),’’, and 
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(2) by adding at the end the following new sub-
section: 
‘‘(h) EXCESS CONTRIBUTIONS TO FARM RISK MAN-
AGEMENT ACCOUNTS.—For purposes of this section, in 
the case of farm risk management accounts (within the 
meaning of section 224(e)), the term ‘excess contribution’ 
means the sum of— 
‘‘(1) the aggregate amount contributed for the 
taxable year to the accounts (other than rollover 
contributions described in section 224(h)(4)) which 
is not allowable as a deduction under section 224 for 
such year, and 
‘‘(2) the amount determined under this sub-
section for the preceding taxable year, reduced by 
the sum of— 
‘‘(A) the distributions out of the accounts 
with respect to which additional tax was im-
posed under section 224(h)(2), and 
‘‘(B) the excess (if any) of— 
‘‘(i) the maximum amount allowable 
as a deduction under section 224(c) for the 
taxable year, over 
‘‘(ii) the amount contributed to the 
accounts for the taxable year. 
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For purposes of this subsection, any contribution 
which is distributed out of the farm risk manage-
ment account in a distribution to which section 
224(h)(3) applies shall be treated as an amount not 
contributed.’’. 
(d) TAX ON PROHIBITED TRANSACTIONS.— 
(1) Section 4975(c) of such Code (relating to 
tax on prohibited transactions) is amended by add-
ing at the end the following new paragraph: 
‘‘(7) SPECIAL RULE FOR FARM RISK MANAGE-
MENT ACCOUNTS.—An individual for whose benefit a 
farm risk management account (within the meaning 
of section 224(e)) is established shall be exempt 
from the tax imposed by this section with respect to 
any transaction concerning such account (which 
would otherwise be taxable under this section) if, 
with respect to such transaction, the account ceases 
to be a farm risk management account by reason of 
the application of section 224(f)(2) to such ac-
count.’’. 
(2) Section 4975(e)(1) of such Code is amended 
by redesignating subparagraphs (F) and (G) as sub-
paragraphs (G) and (H), respectively, and by insert-
ing after subparagraph (E) the following new sub-
paragraph: 
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‘‘(F) a farm risk management account de-
scribed in section 224(e),’’. 
(e) FAILURE TO PROVIDE REPORTS ON FARM RISK 
MANAGEMENT ACCOUNTS.—Section 6693(a)(2) of such 
Code (relating to reports) is amended by redesignating 
subparagraphs (D) and (E) as subparagraphs (E) and 
(F), respectively, and by inserting after subparagraph (C) 
the following new subparagraph: 
‘‘(D) section 224(i) (relating to farm risk 
management accounts),’’. 
(f) CLERICAL AMENDMENT.—The table of sections 
for part VII of subchapter B of chapter 1 of such Code 
is amended by striking the last item and inserting the fol-
lowing: 
‘‘Sec. 224. Farm risk management accounts. 
‘‘Sec. 225. Cross reference.’’. 
(g) CONFORMING AMENDMENTS TO FEDERAL CROP 
INSURANCE ACT.— 
(1) PAYMENT
OF
PORTION
OF
PREMIUM
BY 
FEDERAL CROP INSURANCE CORPORATION.—Section 
508(e) of the Federal Crop Insurance Act (7 U.S.C. 
1508(e)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) TRANSITION TO FARM RISK MANAGEMENT 
ACCOUNTS.—If a producer enters into an agreement 
under section 224 of the Internal Revenue Code of 
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1986 to forgo any Federal subsidy toward the pre-
mium of any crop insurance policy in exchange for 
contributions by the Secretary to a farm risk man-
agement account of the producer, then, in connec-
tion with the purchase of any crop insurance policy 
during the first 3 taxable years for which the Sec-
retary makes contributions under subsection (g) of 
such section to a farm risk management account of 
the producer, the amount of the premium to be paid 
by the Corporation under this subsection shall be 
equal to— 
‘‘(A) for the first taxable year, 75 percent 
of the amount of the premium that would oth-
erwise be paid by the Corporation under this 
subsection; 
‘‘(B) for the second taxable year, 50 per-
cent of the amount of the premium that would 
otherwise be paid by the Corporation under this 
subsection; and 
‘‘(C) for the third taxable year, 25 percent 
of the amount of the premium that would oth-
erwise be paid by the Corporation under this 
subsection.’’. 
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(2) FUNDING SOURCE.—Section 516(b) of such 
Act (7 U.S.C. 1516(b)) is amended by adding at the 
end the following new paragraph: 
‘‘(3) CONTRIBUTIONS TO FARM RISK MANAGE-
MENT ACCOUNTS.—The Secretary shall use the in-
surance fund established under subsection (c) to 
make required contributions to farm risk manage-
ment accounts established under section 224 of the 
Internal Revenue Code of 1986.’’. 
(h) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
Æ 
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