100 STAT. 2224
PUBLIC LAW 99-514—OCT. 22, 1986
(1) The heading for section 464 is amended by striking out "IN CASE OF FARMING SYNDICATES" and inserting in lieu thereof "FOR CERTAIN FARMING". (2) The table of sections for subpart C of part II of subchapter E of chapter 1 is amended by striking out "in case of farming syndicates" in the item relating to section 464 and inserting in lieu thereof "for certain farming expenses". (c) EFFECTIVE DATE.—The amendments made by this section shall apply to amounts paid or incurred after March 1, 1986, in taxable years beginning after such date. SEC. 405. TAX TREATMENT OF DISCHARGE OF CERTAIN INDEBTEDNESS OF SOLVENT FARMERS. (a) IN GENERAL.—Section 108 (relating to income from discharge of indebtedness) is amended by adding at the end thereof the following new subsection: "(g) SPECIAL RULES FOR DISCHARGE OF QUALIFIED FARM INDEBTEDNESS OF SOLVENT FARMERS.—
"(1) IN GENERAL.—For purposes of this section and section 1017, the discharge by a qualified person of qualified farm indebtedness of a taxpayer who is not insolvent at the time of the discharge shall be treated in the same manner as if the discharge had occurred when the taxpayer was insolvent. "(2)
QUALIFIED FARM INDEBTEDNESS.—For purpOSeS of t h i s
subsection, indebtedness of a taxpayer shall be treated as qualified farm indebtedness if— "(A) such indebtedness was incurred directly in connection with the operation by the taxpayer of the trade or business of farming, and "(B) 50 percent or more of the average annual gross sfriJ receipts of the taxpayer for the 3 taxable years preceding .;(, the taxable year in which the discharge of such indebtedness occurs is attributable to the trade or business of farming. "(3) QuAUFiED PERSON.—For purposes of this subsection, the term 'qualified person' means a person described in section 46(c)(8)(D)(iv)." Ob) BASIS ADJUSTMENT.—Section lOlTOt)) (relating to basis adjustment) is amended by adding at the end thereof the following new paragraph: "(4) ORDERING RULE IN THE CASE OF QUALIFIED FARM INDEBTED-
NESS.—Any amount which is excluded from gross income under section 108(a) by reason of the discharge of qualified farm indebtedness (within the meaning of section 108(g)(2)) and which under subsection (b) of section 108 is to be applied to reduce basis shall be applied— "(A) first to reduce the tax attributes described in section 108(b)(2) (other than subparagraph (D) thereof), "(B) then to reduce basis of property other than property described in subparagraph (C), and "(C) then to reduce the basis of land used or held for use in the trade or business of farming." (c) EFFECTIVE DATE.—The amendments made by this section shall apply to discharges of indebtedness occurring after April 9, 1986, in taxable years ending after such date.
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