H.R. 8591: No Capital Gains Tax on Family Farms Act

This bill, titled the No Capital Gains Tax on Family Farms Act, proposes changes to the Internal Revenue Code to exempt certain sales of farm property from capital gains tax when sold to family members. Here are the key aspects of the bill:

Exclusion from Gross Income

The bill states that a taxpayer's gross income will not include any gain from the sale or exchange of "qualified farm property" if it is sold to a "qualified family member." This exclusion is intended to alleviate tax burdens on family farms when ownership is transferred within the family.

Definitions

To clarify what falls under the exemption:

• Qualified Farm Property: This is defined as any interest in real estate located in the United States that has been used as a farm for a cumulative two years or more during the eight years leading up to the sale.
• Qualified Family Member: This includes the taxpayer's spouse, their direct descendants (children, grandchildren), parents, and siblings or their spouses. Adopted children are treated as biological children for these purposes.

Special Rules

The bill outlines specific rules regarding the basis of the property sold:

• Tax Basis for Family Members: The basis (the value used for calculating gain or loss) of the property in the hands of the family member receiving it will be the same as it was for the seller before the sale.
• Increased Basis After 10 Years: If the property is held by the qualified family member for ten years without being sold or disposed of, its tax basis will increase by the difference between the fair market value at the time of sale and the original basis.

Regulations

The bill authorizes the Secretary of the Treasury to establish regulations necessary to implement these provisions, including additional guidance on specific scenarios not covered or where only part of the property is involved.

Clerical Amendment

The bill also specifies a clerical change to the tax code to include the new section regarding the exclusion of gains from the sale of qualified farm property following the listed guidelines.

Effective Date

The provisions of this bill, if enacted, will apply to any sales or exchanges of qualifying properties that occur after the date of enactment.

Relevant Companies

None found.