(a) General rule
(1) Ordinary income
Except as otherwise provided in this section, if farm land which the taxpayer has held for less than 10 years is disposed of during a taxable year beginning after December 31, 1969, the lower of—
(A) the applicable percentage of the aggregate of the deductions allowed under sections 175 (relating to soil and water conservation expenditures) and 182 (relating to expenditures by farmers for clearing land) for expenditures made by the taxpayer after December 31, 1969, with respect to the farm land or
(B) the excess of—
(i) the amount realized (in the case of a sale, exchange, or involuntary conversion), or the fair market value of the farm land (in the case of any other disposition), over
(ii) the adjusted basis of such land,
shall be treated as ordinary income. Such gain shall be recognized notwithstanding any other provision of this subtitle.
(2) Farm land
For purposes of this section, the term “farm land” means any land with respect to which deductions have been allowed under sections 175 (relating to soil and water conservation expenditures) or 182 (as in effect on the day before the date of the enactment of the Tax Reform Act of 1986).
(3) Applicable percentage
For purposes of this section—
|If the farm land is disposed of—||The applicable
|Within 5 years after the date it was acquired||100 percent.|
|Within the sixth year after it was acquired||80 percent.|
|Within the seventh year after it was acquired||60 percent.|
|Within the eighth year after it was acquired||40 percent.|
|Within the ninth year after it was acquired||20 percent.|
|10 years or more years after it was acquired||0 percent.|
(b) Special rules
Under regulations prescribed by the Secretary, rules similar to the rules of section 1245 shall be applied for purposes of this section.
(Added Pub. L. 91–172, title II, §214(a), Dec. 30, 1969, 83 Stat. 572; amended Pub. L. 94–455, title XIX, §§1901(b)(3)(K), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1793, 1834; Pub. L. 98–369, div. A, title IV, §492(b)(5), July 18, 1984, 98 Stat. 854; Pub. L. 99– 4, title IV, §402(b)(2), Oct. 22, 1986, 100 Stat. 2221.)
References in Text
The date of the enactment of the Tax Reform Act of 1986, referred to in subsec. (a)(1)(A), is the date of enactment of Pub. L. 99– 4, which was approved Oct. 22, 1986. Section 402(a) of the Tax Reform Act of 1986 repealed section 182 of this title.
1986—Subsec. (a)(1)(A). Pub. L. 99– 4 substituted “(as in effect on the day before the date of the enactment of the Tax Reform Act of 1986)” for “(relating to expenditures by farmers for clearing land)”.
1984—Subsec. (a)(1). Pub. L. 98–369 struck out “, except that this section shall not apply to the extent section 12 applies to such gain” after “of this subtitle” in last sentence.
1976—Subsec. (a)(1). Pub. L. 94–455, §1901(b)(3)(K), substituted “ordinary income” for “gain from the sale or exchange of property which is neither a capital asset nor property described in section 1231”.
Subsec. (b). Pub. L. 94–455, §1906(b)(13)(A), struck out “or his delegate” after “Secretary”.
Effective Date of 1986 Amendment
Amendment by Pub. L. 99– 4 applicable to amounts paid or incurred after Dec. 31, 1985, in taxable years ending after such date, see section 402(c) of Pub. L. 99– 4, set out as an Effective Date of Repeal note under former section 182 of this title.
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–369 applicable to taxable years beginning after Dec. 31, 1983, see section 492(d) of Pub. L. 98–369, set out as a note under section 170 of this title.
Effective Date of 1976 Amendment
Amendment by section 1901(b)(3)(K) of Pub. L. 94–455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title.
Section 214(c) of Pub. L. 91–172 provided that: “The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1969.”