I 
109TH CONGRESS 
1ST SESSION H. R. 4221 
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 
NOVEMBER 3, 2005 
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. SPECIAL RULES FOR EXCHANGE OF QUALIFIED AG-
RICULTURAL PROPERTY FOR REAL PROP-
ERTY. 
(a) TREATED AS LIKE KIND WITH REAL PROP-
ERTY.—Section 1031 of the Internal Revenue Code of
1986 is amended by adding at the end the following new 
subsection: 
‘‘(i) QUALIFIED AGRICULTURAL PROPERTY TREAT-
ED AS LIKE KIND WITH REAL PROPERTY.—For purposes 
of this section— 
‘‘(1) IN GENERAL.—In the case of the exchange 
of qualified agricultural property for real property 
held either for productive use in a trade or business 
or for investment, such qualified agricultural prop-
erty and such real property shall be treated as prop-
erty of a like kind. 
‘‘(2) QUALIFIED AGRICULTURAL PROPERTY.— 
The term ‘qualified agricultural property’ means— 
‘‘(A) any single purpose agricultural or 
horticultural structure (as defined in section 
168(i)(13)), and 
‘‘(B) any equipment or fixtures which are 
related in use to such structure.’’. 
(b) ORDINARY
INCOME
RECAPTURE
DEFERRED 
UNTIL DISPOSITION OF REAL PROPERTY ACQUIRED IN 
EXCHANGE.— 
(1) IN
GENERAL.—Subsection (b) of section 
1245 of such Code is amended by adding at the end 
the following new paragraph:
‘‘(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 1031(i)) is 
disposed of and gain (determined without re-
gard to this section) is not recognized in whole 
or in part under section 1031, 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) real property held either for 
productive use in a trade or business 
or for investment. 
‘‘(B) ORDINARY INCOME RECAPTURE ON 
DISPOSITION OF REAL PROPERTY ACQUIRED IN 
EXCHANGE.—If real property the fair market 
value of which is taken into account under sub-
paragraph (A)(ii)(II) in determining the gain 
on the disposition of any qualified agricultural 
property 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 
‘‘(II) the adjusted basis of such 
real property, or 
‘‘(ii) the amount of gain that would 
have been treated as ordinary income 
under this section if such qualified agricul-
tural property were sold at fair market 
value on the date of the disposition of such 
structure, 
shall be treated as ordinary income. Such gain 
shall be recognized notwithstanding any other 
provision of this subtitle.’’. 
(2) CONFORMING AMENDMENT.—Paragraph (4) 
of section 1245(b) of such Code is amended by strik-
ing ‘‘If’’ and inserting ‘‘Except as provided in para-
graph (9), if’’. 
(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. 
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 1031(i)) 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 
‘‘(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. 
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