Blog · 14 October 2026

Section 1062 Farmland Election (OBBBA): Proposed Regs IR-2026-115 and a Tax-Payment Installment Guide for US CPA Firms

By Keshav Bansal, CA

The new section 1062 farmland election lets eligible sellers spread payment of the tax on gain from certain farmland sales—not the recognition of that gain—over four equal annual installments. Treasury and the IRS issued proposed regulations under IR-2026-115 (September 28, 2026; Federal Register September 29, 2026), with comments due November 30, 2026. For US CPA firms advising farm clients or landowners after the One, Big, Beautiful Bill Act (OBBBA), the practical distinction from a classic §453 installment sale is the first planning conversation.

What IR-2026-115 and the proposed regs say

Per IR-2026-115 (September 28, 2026), IRC §1062 allows eligible taxpayers who sell or exchange qualifying farmland to a qualified farmer to elect to pay the tax attributable to the gain in four equal annual installments. The election applies to qualified sales or exchanges in taxable years beginning after July 4, 2025.

As the IRS states the payment schedule:

• Four 25% installments. Taxpayers making the election would pay 25% of the applicable tax liability with each of four annual installment payments.
• First payment ignores extensions. The first payment would generally be due on the regular due date of the federal income tax return for the year of the sale or exchange, without regard to extensions.
• Later payments track regular return due dates. Each remaining payment would generally be due on the regular return due date for the following taxable year.

That “without regard to extensions” rule is easy to miss on a busy October 15 calendar. A Form 4868 extension still gives more time to file; it does not push the first §1062 installment. Pair this with your firm’s October 15 extension deadline checklist so farm-sale clients do not confuse filing relief with payment timing.

Who qualifies: farmland, farming use, buyer and restriction

Per IR-2026-115, to qualify the farmland must be real property located in the United States that was generally used by the taxpayer for farming purposes, or leased to a qualified farmer for farming purposes, during substantially all of the 10 years before the sale or exchange. The property must also be subject to a legally enforceable restriction that generally prevents use for anything other than farming for 10 years after the sale or exchange. The buyer must be an individual who is actively engaged in farming.

The proposed regulations (as summarized in the same release) also address:

• Pass-through and estate sales. For a sale by a partnership or S corporation, partners and shareholders generally would make their own elections with respect to their share of the gain. Similar rules would apply when gain passes through a trust or estate to a beneficiary.
• Temporary out-of-production periods. How the prior 10-year farming-use requirement may be satisfied when farmland is temporarily taken out of production under a government program, as part of recognized farming practices, or because of events outside the taxpayer’s control.

Until final regulations are published, treat these as proposed rules. Document farming use, lease history, the post-sale restriction, and the buyer’s active-farming status in the engagement file before anyone relies on the election draft.

§1062 vs §453: payment timing vs gain recognition

Clients (and some software screens) will call both “installment” treatments. They are not the same tool.

• §1062 farmland election. Gain is recognized in the year of the qualified sale or exchange under the normal recognition rules. The election spreads payment of the tax on that gain over four 25% annual installments (per IR-2026-115).
• §453 installment sale. Gain recognition is generally spread as buyer payments arrive (Form 6252). Depreciation recapture is typically taxed up front. The seller’s cash receipts drive when gain is reported, not a statutory four-payment tax schedule on fully recognized gain.

For engagement letters and client memos, say “§1062 tax-payment installments” versus “§453 installment-sale reporting.” That wording reduces the risk that a client assumes a §1062 election also defers reporting the gain on the sale-year return.

Cash-flow planning still matters after the election. Spreading tax payments is not the same as an IRS collection installment agreement or an offer in compromise. When a client already owes other balances, keep the §1062 schedule separate from the toolbox in our IRS collection alternatives guide (payment plans, OIC, AEP).

What US CPA firms should do now

• Screen 2025–2026 farm land deals early. The election applies to qualified sales in tax years beginning after July 4, 2025. Calendar-year sellers with mid-2025 or later closings need a qualification checklist before return prep, not after e-file.
• Build a §1062 eligibility packet. Capture: U.S. real property description; farming or lease-to-farmer use for substantially all of the prior 10 years; draft or recorded 10-year farming-use restriction; buyer identity and active-farming facts; entity type if the seller is a partnership, S corporation, trust or estate.
• Calendar the first installment without the extension cushion. Model estimated tax and the first 25% payment against the regular return due date. Do not assume an extension or a late e-file delay changes that date under the proposed rules as IR-2026-115 describes them.
• Coordinate pass-through elections. Tell partners and S shareholders that, under the proposed approach in IR-2026-115, elections generally sit at the owner level for their share of the gain. Align K-1 footnotes, estimated payments and client communications so owners do not miss the first installment while waiting on the entity return.
• Compare §1062 to §453 (and cash sales) in writing. Same closing can support different tax and cash outcomes. Document why the firm recommended (or declined) the farmland election versus an installment-sale contract structure.
• Watch OBBBA-related withholding and return lines separately. Farmland election work sits beside other OBBBA implementation items—such as the draft 2027 Form W-4 lines covered in our draft 2027 Form W-4 / OBBBA guide—but §1062 is a sale-year payment election, not a payroll-withholding change.
• Plan for comments and final regs. Comments on the proposed regulations are due November 30, 2026. Firms with active farm-sale pipelines should assign someone to track the Federal Register docket and IRS updates before locking multi-year payment models in client plans.

Where this fits for Tax Brew readers

Section 1062 is a niche but high-dollar election: one missed qualification fact or one missed first installment can erase the cash-flow benefit clients expect. US CPA firms that already run farm, ranch or rural land clients should add the IR-2026-115 checklist to sale-year planning now, while the rules are still proposed.

If farmland-sale return prep, K-1 packaging or estimated-tax modeling is stretching capacity, outsourced tax prep and bookkeeping support for US CPA firms can take document gathering and draft schedules while your signing professionals keep the election judgment. Email info@taxbrewglobal.com.

Check current IRS guidance: this article summarizes IR-2026-115 (September 28, 2026) and the related proposed regulations published in the Federal Register on September 29, 2026. Comments are due November 30, 2026. The rules are proposed, not final. Confirm every eligibility fact, payment due date and election procedure with current IRS guidance and the final regulations before advising clients. This is general information, not tax or legal advice. Sources as of 14 October 2026.