26 U.S.C. § 1062 — Gain from the sale or exchange of qualified farmland property to qualified farmers

(a) Election to pay tax in installments. When a taxpayer gains money from selling or exchanging qualified farmland property to a qualified farmer, the taxpayer may elect to pay the part of the taxpayer’s net income tax equal to the applicable net tax liability in four equal installments. (b) Rules relating to installment payments. (1) The first installment is due on the normal due date for the tax return for the year of the sale or exchange, without considering filing extensions. Each later installment is due on the normal return due date for the year after the year for which the preceding installment was made. (2)(A) If tax is added because an installment was not timely paid, all unpaid later installments become due on the date of that failure. (B) If an individual taxpayer dies, the unpaid later installments are due on the return due date for the year of death. (C) For a C corporation, trust, or estate, the unpaid later installments become due when the taxpayer liquidates, sells substantially all assets, stops doing business (for a C corporation), or faces a similar event. In a title 11 or similar case, they are due the day before the petition is filed. This does not apply when substantially all assets are sold to a buyer who agrees with the Secretary to pay the remaining installments as if the buyer were the taxpayer. (3) If a deficiency is assessed for the applicable net tax liability, it must be divided among the installments. The part assigned to an installment not yet due is collected with that installment. The part assigned to an installment already due is paid after the Secretary gives notice and demands payment. These rules do not apply when the deficiency resulted from negligence, intentional disregard of rules or regulations, or fraud intended to evade tax. (c) Election. (1) The election must be made by the return’s due date for the year of the sale or exchange. (2) If a partnership or S corporation made the sale or exchange, the election is made by the partner or shareholder. The Secretary may issue regulations or other guidance needed to carry out this paragraph. (d) Definitions. (1) “Applicable net tax liability” is any excess of the taxpayer’s net income tax for the year over the tax that would result without counting gain from the sale or exchange. “Net income tax” means regular tax liability reduced by credits allowed under subparts A, B, and D of part IV of subchapter A. (2) “Qualified farmland property” means United States real property that, during substantially all of the 10-year period ending on the qualified sale or exchange date, the taxpayer used as a farm for farming purposes or leased to a qualified farmer for farming purposes, and that is subject to a covenant or other legally enforceable restriction barring nonfarm use before the date 10 years after the sale or exchange. Property used or leased by a partnership or S corporation this way is treated as used or leased this way by each person with a direct or indirect interest in it. “Farm” and “farming purposes” have the meanings given in section 2032A(e). (3) “Qualified farmer” means an individual actively engaged in farming within the meaning of subsections (b) and (c) of section 1001 of the Food Security Act of 1986 (7 U.S.C. 1308–1(b) and (c)). (e) Return requirement. A taxpayer making the election must attach to the return for the sale-or-exchange year a copy of the covenant or other enforceable restriction described in subsection (d)(2)(A)(ii).