Taxpayers who sell or exchange qualified farmland to active farmers can elect to pay the tax on the gain in four equal installments under proposed regulations released by the Treasury Department and the IRS on Monday.
Section 1062 of the Internal Revenue Code allows eligible taxpayers to spread payment of the tax attributable to gain from certain sales or exchanges of farmland over four years.
The election applies to qualified sales or exchanges made in taxable years beginning after July 4, 2025—the day the One Big Beautiful Bill Act was signed by President Donald Trump. Republicans have rebranded the OBBBA as the Working Families Tax Cuts.
“Farmers should have practical options when farmland is sold,” IRS CEO Frank Bisignano said in a written statement on Sept. 28. “The Working Families Tax Cuts helps keep farmland in agricultural use by allowing eligible sellers to spread their tax payments over four years when qualifying property is sold to active farmers.”
To qualify, the farmland must be real property located in the U.S. that was generally used by the taxpayer for farming purposes, or leased to a qualified farmer for farming purposes, during substantially all of the 10 years before the sale or exchange. The property must also be subject to a legally enforceable restriction that generally prevents it from being used for anything other than farming for 10 years after the sale or exchange. In addition, the buyer must be an individual who is actively engaged in farming.
Taxpayers making the election would pay 25% of the applicable tax liability with each of four annual installment payments, according to the IRS.
The first payment would generally be due on the regular due date of the taxpayer’s federal income tax return, without regard to extensions, for the year of the sale or exchange. Each remaining payment would generally be due on the regular return due date for the following taxable year.
The proposed rules also address sales or exchanges by partnerships, S corporations, trusts, and estates. In the case of a sale by a partnership or S corporation, partners and shareholders generally would make their own elections with respect to their share of the gain. Similar rules would apply when gain passes through a trust or estate to a beneficiary, the IRS says.
The proposal also explains how taxpayers can satisfy the prior 10-year farming-use requirement in certain circumstances, including when farmland is temporarily taken out of production under a government program, as part of recognized farming practices or because of events outside the taxpayer’s control.
The Treasury Department and the IRS request comments on the proposed regulations. Written or electronic comments must be received by Nov. 30, 2026, in accordance with the instructions in the proposed regulations.
Photo credit: Mikki Seifu/Unsplash
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