
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1257]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                 Subchapter P--Capital Gains and Losses
 
     PART IV--SPECIAL RULES FOR DETERMINING CAPITAL GAINS AND LOSSES
 
Sec. 1257. Disposition of converted wetlands or highly erodible 
        croplands
        

(a) Gain treated as ordinary income

    Any gain on the disposition of converted wetland or highly erodible 
cropland shall be treated as ordinary income. Such gain shall be 
recognized notwithstanding any other provision of this subtitle, except 
that this section shall not apply to the extent such gain is recognized 
as ordinary income under any other provision of this part.

(b) Loss treated as long-term capital loss

    Any loss recognized on the disposition of converted wetland or 
highly erodible cropland shall be treated as a long-term capital loss.

(c) Definitions

    For purposes of this section--

                        (1) Converted wetland

        The term ``converted wetland'' means any converted wetland (as 
    defined in section 1201(4) \1\ of the Food Security Act of 1985 (16 
    U.S.C. 3801(4))) held--
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    \1\ See References in Text note below.
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            (A) by the person whose activities resulted in such land 
        being converted wetland, or
            (B) by any other person who at any time used such land for 
        farming purposes.

                    (2) Highly erodible cropland

        The term ``highly erodible cropland'' means any highly erodible 
    cropland (as defined in section 1201(6) \1\ of the Food Security Act 
    of 1985 (16 U.S.C. 3801(6))), if at any time the taxpayer used such 
    land for farming purposes (other than the grazing of animals).

                     (3) Treatment of successors

        If any land is converted wetland or highly erodible cropland in 
    the hands of any person, such land shall be treated as converted 
    wetland or highly erodible cropland in the hands of any other person 
    whose adjusted basis in such land is determined (in whole or in 
    part) by reference to the adjusted basis of such land in the hands 
    of such person.

(d) Special rules

    Under regulations prescribed by the Secretary, rules similar to the 
rules applicable under section 1245 shall apply for purposes of 
subsection (a). For purposes of sections 170(e), 341(e)(12), and 751(c), 
amounts treated as ordinary income under subsection (a) shall be treated 
in the same manner as amounts treated as ordinary income under section 
1245.

(Added Pub. L. 99-514, title IV, Sec. 403(a), Oct. 22, 1986, 100 Stat. 
2222.)

                       References in Text

    Section 1201(4) of the Food Security Act of 1985 (16 U.S.C. 3801(4)) 
and section 1201(6) of the Food Security Act of 1985 (16 U.S.C. 
3801(6)), referred to in subsec. (c)(1), (2), probably are references to 
section 1201(a)(4) and 1201(a)(6) of that Act (16 U.S.C. 3801(a)(4), 
(6)). Section 1201 of the Food Security Act of 1985 was subsequently 
amended, and subsecs. (a)(4) and (a)(6) of section 1201 no longer define 
the terms ``converted wetland'' and ``highly erodible cropland'', 
respectively. However, such terms are defined elsewhere in that section.


                             Effective Date

    Section 403(c) of Pub. L. 99-514 provided that: ``The amendments 
made by this section [enacting this section] shall apply to dispositions 
of converted wetland or highly erodible cropland (as defined in section 
1257(c) of the Internal Revenue Code of 1986 as added by this section) 
first used for farming after March 1, 1986, in taxable years ending 
after that date.''
