On September 28, 2026, the Treasury Department and the IRS issued IR-2026-115, announcing proposed regulations for an election to pay tax on gains from certain farmland sales in four equal annual installments.
What the IRS Announced
The proposal addresses Section 1062 of the Internal Revenue Code. According to the IRS, eligible taxpayers may elect to spread payment of the tax attributable to gain from a qualifying sale or exchange of farmland over four years.
The election applies to qualified sales or exchanges made in taxable years beginning after July 4, 2025. Because the regulations are proposed, taxpayers should review the final rules and current IRS guidance before relying on them.
Which Farmland Could Qualify
The IRS release says the property must be real estate in the United States. It generally must have been used by the seller for farming, or leased to a qualified farmer for farming, during substantially all of the 10 years before the sale or exchange.
The property must also be covered by a legally enforceable restriction that generally prevents nonfarming use for 10 years after the transaction. In addition, the buyer must be an individual who is actively engaged in farming.
These conditions are specific. A sale of agricultural property does not qualify solely because the property has been used as farmland.
How the Proposed Election Would Work
A taxpayer making the election would pay 25% of the applicable tax liability in each of four annual installments. The proposal concerns the timing of tax payments on qualifying gain; it does not mean the gain is excluded from tax.
Eligibility, the amount of tax attributable to the gain, and the election procedure can depend on the transaction and the final regulations. Sellers considering the election should consult a qualified tax professional.
Why Recordkeeping Matters
The proposed requirements look to the property’s use before the transaction and to restrictions that apply afterward. Documentation such as ownership records, leases, farming-use records, sale documents, and the enforceable land-use restriction may be relevant when determining whether a transaction qualifies.
Simple-C helps Schedule C filers keep business income, expenses, and supporting records organized. It does not determine whether a farmland transaction qualifies for this specialized election, but orderly records can help a tax professional evaluate the facts.
This article provides general information, not tax advice. The regulations discussed are proposed and may change before they are finalized. Confirm current guidance on IRS.gov and consult a qualified tax professional about a specific transaction.