---
kind: "section"
citation: "26 U.S.C. § 1062"
title: "26"
title_heading: "Internal Revenue Code"
number: "1062"
heading: "Gain from the sale or exchange of qualified farmland property to qualified farmers"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/1062"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter O — Gain or Loss on Disposition of Property"
  - "Part IV — Special Rules"
---

# §1062. Gain from the sale or exchange of qualified farmland property to qualified farmers

- (a) **Election to pay tax in installments—** In the case of gain from the [sale or exchange](/usc/26/864.md?p=c-8-D) of qualified farmland [property](/usc/26/317.md?p=a) to a qualified farmer, at the election of the [taxpayer](/usc/26/1313.md?p=b), the portion of the net income tax of such [taxpayer](/usc/26/1313.md?p=b) for the taxable year of the [sale or exchange](/usc/26/864.md?p=c-8-D) which is equal to the applicable net tax liability shall be paid in 4 equal installments.
- (b) **Rules relating to installment payments—**
  - (1) **Date for payment of installments—** If an election is made under [subsection (a)](#a), the first installment shall be paid on the [due date](/usc/26/430.md?p=k-6-B) (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year in which the [sale or exchange](/usc/26/864.md?p=c-8-D) occurs and each succeeding installment shall be paid on the [due date](/usc/26/430.md?p=k-6-B) (as so determined) for the return of tax for the taxable year following the taxable year with respect to which the preceding installment was made.
  - (2) **Acceleration of payment—**
    - (A) **In general—** If there is an addition to tax for failure to timely pay any installment required under this section, then the unpaid portion of all remaining installments shall be due on the date of such failure.
    - (B) **Individuals—** In the case of an individual, if the individual dies, then the unpaid portion of all remaining installment shall be paid on the [due date](/usc/26/430.md?p=k-6-B) for the return of tax for the taxable year in which the [taxpayer](/usc/26/1313.md?p=b) dies.
    - (C) **C corporations—** In the case of a [taxpayer](/usc/26/1313.md?p=b) which is a [C corporation](/usc/26/1361.md?p=a-2), trust, or [estate](/usc/26/1361.md?p=c-3), if there is a liquidation or sale of substantially all the assets of the [taxpayer](/usc/26/1313.md?p=b) (including in a [title 11](/usc/11.md) or similar case), a cessation of business by the [taxpayer](/usc/26/1313.md?p=b) (in the case of a [C corporation](/usc/26/1361.md?p=a-2)), or any similar circumstance, then the unpaid portion of all remaining installments shall be due on the date of such event (or in the case of a [title 11](/usc/11.md) or similar case, the day before the petition is filed). The preceding sentence shall not apply to the sale of substantially all the assets of a [taxpayer](/usc/26/1313.md?p=b) to a buyer if such buyer enters into an agreement with the Secretary under which such buyer is liable for the remaining installments due under this subsection in the same manner as if such buyer were the [taxpayer](/usc/26/1313.md?p=b).
  - (3) **Proration of deficiency to installments—** If an election is made under [subsection (a)](#a) to pay the applicable net tax liability in installments and a deficiency has been assessed with respect to such applicable net tax liability, the deficiency shall be prorated to the installments payable under [subsection (a)](#a). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected at the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. This section shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax.
- (c) **Election—**
  - (1) **In general—** Any election under [subsection (a)](#a) shall be made not later than the [due date](/usc/26/430.md?p=k-6-B) for the return of tax for the taxable year described in [subsection (a)](#a).
  - (2) **Partnerships and S corporations—** In the case of a [sale or exchange](/usc/26/864.md?p=c-8-D) described in [subsection (a)](#a) by a [partnership](/usc/26/761.md?p=a) or [S corporation](/usc/26/1361.md?p=a-1), the election under [subsection (a)](#a) shall be made at the [partner](/usc/26/761.md?p=b) or shareholder level. The Secretary may prescribe such regulations or other guidance as necessary to carry out the purposes of this paragraph.
- (d) **Definitions—** For purposes of this section—
  - (1) **Applicable net tax liability—**
    - (A) **In general—** The applicable net tax liability with respect to the [sale or exchange](/usc/26/864.md?p=c-8-D) of any [property](/usc/26/317.md?p=a) described in [subsection (a)](#a) is the excess (if any) of—
      - (i) such [taxpayer](/usc/26/1313.md?p=b)’s net income tax for the taxable year, over
      - (ii) such [taxpayer](/usc/26/1313.md?p=b)’s net income tax for such taxable year determined without regard to any gain recognized from the [sale or exchange](/usc/26/864.md?p=c-8-D) of such [property](/usc/26/317.md?p=a).
    - (B) **Net income tax—** The term “net income tax” means the [regular tax liability](/usc/26/26.md?p=b-1) reduced by the credits allowed under subparts A, B, and D of part IV of subchapter A.
  - (2) **Qualified farmland property—**
    - (A) **In general—** The term “qualified farmland [property](/usc/26/317.md?p=a)” means real [property](/usc/26/317.md?p=a) located in the [United States](/usc/26/993.md?p=g)—
      - (i) which—
        - (I) has been used by the [taxpayer](/usc/26/1313.md?p=b) as a farm for farming purposes, or
        - (II) leased by the [taxpayer](/usc/26/1313.md?p=b) to a qualified farmer for farming purposes,

      during substantially all of the 10-year period ending on the date of the qualified [sale or exchange](/usc/26/864.md?p=c-8-D), and

      - (ii) which is subject to a covenant or other legally enforceable restriction which prohibits the use of such [property](/usc/26/317.md?p=a) other than as a farm for farming purposes for any period before the date that is 10 years after the date of the [sale or exchange](/usc/26/864.md?p=c-8-D) described in [subsection (a)](#a).

      For purposes of [clause (i)](#d-2-A-i), [property](/usc/26/317.md?p=a) which is used or leased by a [partnership](/usc/26/761.md?p=a) or [S corporation](/usc/26/1361.md?p=a-1) in a manner described in such clause shall be treated as used or leased in such manner by each person who holds a direct or indirect [interest](/usc/26/856.md?p=f-1) in such [partnership](/usc/26/761.md?p=a) or [S corporation](/usc/26/1361.md?p=a-1).

    - (B) **Farm; farming purposes—** The terms “farm” and “farming purposes” have the respective meanings given such terms under [section 2032A(e)](/usc/26/2032A.md?p=e).
  - (3) **Qualified farmer—** The term “qualified farmer” means any individual who is actively engaged in farming (within the meaning of subsections [(b)](/usc/26/1001.md?p=b) and [(c)](/usc/26/1001.md?p=c) of section 1001 of the Food Security Act of 1986[^1] ([7 U.S.C. 1308–1(b)](/usc/7/1308–1.md?p=b) and (c))).
- (e) **Return requirement—** A [taxpayer](/usc/26/1313.md?p=b) making an election under [subsection (a)](#a) shall include with the return for the taxable year of the [sale or exchange](/usc/26/864.md?p=c-8-D) described in [subsection (a)](#a) a copy of the covenant or other legally enforceable restriction described in [subsection (d)(2)(A)(ii)](#d-2-A-ii).

## Footnotes

[^1]: See References in Text note below.

## Source credit

(Added Pub. L. 119–21, title VII, § 70437(a), July 4, 2025, 139 Stat. 248.)

## Notes

### Editorial Notes

### References in Text

Subsections (b) and (c) of section 1001 of the Food Security Act of 1986, referred to in subsec. (d)(3), probably should be a reference to subsections (b) and (c) of section 1001A of the Food Security Act of 1985, which is classified to section 1308–1(b), (c) of Title 7, Agriculture.

### Prior Provisions

A prior section 1062 was renumbered section 1063 of this title.

### Statutory Notes and Related Subsidiaries

### Effective Date

Pub. L. 119–21, title VII, § 70437(c), July 4, 2025, 139 Stat. 250, provided that: “The amendments made by this section [enacting this section and renumbering former section 1062 of this title as section 1063] shall apply to sales or exchanges in taxable years beginning after the date of the enactment of this Act [July 4, 2025].”