New Installment Sale Election for Qualified Farmland

The One Big Beautiful Bill Act (OBBBA) introduced several noteworthy tax provisions, including a new opportunity for taxpayers selling qualified farmland. Section 1062(a) of the Act creates a limited payment deferral election that allows eligible sellers to spread the recognition of gain over time rather than reporting it all in the year of sale.

This provision is designed to ease cash flow concerns and provide additional flexibility for tax planning—particularly for farmers and landowners transitioning property ownership.

What Is the Section 1062(a) Election?

Section 1062(a) allows taxpayers who sell or exchange qualified farmland to elect installment-style treatment for the gain on the sale. Instead of recognizing the full gain immediately, the taxpayer may defer recognition as payments are received over the installment period.

For many sellers, this can significantly reduce the upfront tax burden associated with a farmland sale.

Eligibility Requirements

To qualify for the Section 1062(a) election, all of the following requirements must be met:

• The seller must be a taxpayer disposing of qualified farmland.
• The farmland must meet the definition of “qualified farmland” under IRC §1062.
• The sale or exchange must occur in taxable years beginning after July 4, 2025 (which will apply to most 2026 tax returns).
• The election must be made in accordance with IRS procedures at the time the tax return is filed.

Because eligibility hinges on meeting specific statutory definitions, careful review of the property and transaction details is essential.

Benefits of Making the Election

For eligible taxpayers, the Section 1062(a) election offers several advantages:

• Deferral of gain recognition by spreading payments over the installment period
• Improved cash flow, as taxes are paid over time rather than all at once
• Greater flexibility in income and long-term tax planning strategies

These benefits can be especially meaningful for sellers who are retiring, reinvesting, or transitioning farmland to the next generation.

How to Make the Election

Taxpayers interested in this election should take the following steps:

1. Confirm that the property meets the definition of qualified farmland under IRC §1062.
2. Structure the sale as an installment agreement with clearly defined payment terms.
3. Complete the election form as prescribed by the IRS (currently expected to be included with Form 6252).
4. Attach the election statement to a timely filed tax return for the year of sale.
5. Retain all supporting documentation to substantiate eligibility and the election in the event of IRS review.

Planning Ahead

The Section 1062(a) election presents a valuable tax planning opportunity for taxpayers selling qualified farmland, but it also introduces new compliance considerations. Proper structuring and timely filing are critical to securing the intended benefits.

If you are considering a farmland sale or would like to understand how this provision may apply to your situation, contact your Hawkins Ash tax professional to ensure compliance and maximize the advantages available under the new law.