Overview
Treasury and the IRS issued proposed regulations for Section 1062 of the Internal Revenue Code. They govern how taxpayers who sell or exchange qualifying farmland to qualified farmers may elect to pay the resulting tax in four equal annual installments.
What has changed?
Not described in the IRS release; Section 1062 is the statutory basis for the election.
Each installment is 25% of the tax liability. The first is generally due on the regular due date of the return for the year of sale, without regard to extensions; later installments are generally due on the regular due date for each following year. The proposal also addresses sales by partnerships, S corporations, trusts and estates, and how the 10-year farming-use requirement can be met in certain circumstances, such as government program set-asides.
Who is affected?
Sellers of qualifying farmland (including partnerships, S corporations, trusts and estates), and their partners, shareholders and beneficiaries.
When does it take effect?
The statutory election applies to qualified sales in taxable years beginning after July 4, 2025. The regulations themselves are proposed and not yet final.
What this means for you
- Property must be U.S. real property used for farming, or leased to a qualified farmer for farming, during substantially all of the prior 10 years.
- It must also be subject to a legally enforceable restriction limiting it to farming for 10 years after the sale.
- The buyer must be an individual actively engaged in farming.
- Partners and S corporation shareholders generally make their own elections for their share of the gain.
Recommended next steps
- If you are planning a farmland sale, review the proposed regulations before signing.
- Consider submitting written or electronic comments by the stated deadline.
- Speak with a tax professional about the election and the effect of the installment schedule on your cash flow.
General educational guidance, not tax advice. Schedule a consultation to discuss your situation.
Important dates
- July 4, 2025Election applies to qualified sales in taxable years beginning after this date
- September 28, 2026Proposed regulations issued (IR-2026-115)
- November 30, 2026Comments due (per the proposed regulations' instructions; no hearing date listed in the release)