The IRS begins to issue guidance with respect to new Sections 1062 and 139L

The Winter 2025 edition of the TAXFAX Column described two new sections added to the Code by the One Big Beautiful Bill Act (“OBBBA”) – Section 1062 (Gain from the Sale or Exchange of Qualified Farmland Property to Qualified Farmers) and Section 139L (Interest on Loans Secured by Rural or Agricultural Real Property).

Since then, the Internal Revenue Service (“IRS”) has issued preliminary guidance for both new sections.

 Section 1062

Section 1062 allows owners of farmland who sell that land to farmers to elect to pay resulting federal income tax over four years.  It is effective for tax years beginning after July 4, 2025. 

In December, the IRS released drafts of forms to be used to claim the benefit of this new section.  See, Form 1062 (Deferral of Tax on Gain From the Sale or Exchange of Qualified Farmland Property to Qualified Farmers) and Schedule A to Form 1062 (Section 1062 Gain From the Sale or Exchange of Qualified Farmland Property to a Qualified Farmer). 

These forms figure the tax deferred and the amount to be reported in each installment.

The IRS then released Notice 2026-03, 2026-2 IRB 1, addressing the interplay between new Section 1062 and the rules for estimated income tax payments.  The notice announced a limited waiver for estimated tax penalties when a Section 1062 election is made and taxes are paid consistent with the election.

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