Eliminate False Markets for Farmland (Rep. Adrian Smith)

Earlier this week I, along with 17 of my colleagues, introduced the Farmland Relief Act -- legislation designed to combat the false markets created by section 1031 of the U.S. tax code and alleviate the rapid increase in agriculture land values. Such increases in recent years have caused hurdles to landownership, especially for beginning farmers and ranchers.

Section 1031 allows farmers and other business property owners to defer capital gains taxes on the sale of property by purchasing similar "like-kind" property within 45 days.

This relatively brief timeline often forces sellers to rush to find replacement property in order to qualify for the tax deferral. This, in turn, can lead to aggressive bidding and particularly higher prices for rural land. As land values continue to accelerate, young farmers and ranchers are often outbid by recent sellers hurrying to avoid huge capital gains taxes on recently sold property.

My legislation would extend the window for identifying property to 90 days and exchanging property to 360 days in order to qualify for the tax deferral.

Land prices continue to be one of the toughest hurdles for young people entering agriculture. By extending the time period, as my legislation does, sellers would not be forced to pay more to make the quick sale, and rural land would not be overvalued by eager buyers creating a false market.

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