Instructions for Form 1062

Instructions for Form 1062

(December 2025)

Deferral of Tax on Gain From the Sale or Exchange of Qualified Farmland Property

to Qualified Farmers

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 1062 and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form1062.

What’s New

New election to pay the tax on gain from the sale or

exchange of qualified farmland property to qualified

farmers in installments. For tax years beginning after

July 4, 2025, P.L. 119-21, commonly known as the One

Big Beautiful Bill Act, created a new section 1062 to allow

taxpayers to elect to pay the net income tax attributable to

gain from the sale or exchange of qualified farmland

property to a qualified farmer in four equal annual

installments beginning in the year of the qualified sale or

exchange. This election is made by filing Form 1062,

Schedule(s) A (Form 1062), and a section 1062

covenant(s).

General Instructions

Purpose of Form

Use Form 1062 and Schedule A (Form 1062) to:

• Provide information on each qualified farmland property,

• Report each qualified sale or exchange for which the

taxpayer wants to elect under section 1062 to pay the tax

attributable to the gain in four equal annual installments,

• Calculate and report the taxpayer’s total section 1062

applicable net tax liability and the amount of the first

installment due, and

• Elect under section 1062 to pay net income tax

attributable to gain from a qualified sale or exchange in

four equal annual installments.

Who Must File

Individuals and entities that elect to defer payment of the

net income tax attributable to gain from a qualified sale or

exchange must file Form 1062 no later than the due date

for the income tax return for the year of the qualified sale

or exchange, including extensions.

Partnerships and S corporations. If a partnership or

an S corporation has a qualified sale or exchange, the

section 1062 election is made at the partner or

shareholder level. Partnerships and S corporations do not

file Form 1062. However, the partnership or S corporation

must file Schedule A (Form 1062) with its return. In

addition, the partnership or S corporation must provide

partners or shareholders information regarding the

Apr 10, 2026

qualified sale or exchange, including each partner’s or

shareholder’s share of the gain from the qualified sale or

exchange, a copy of the partnership’s or S corporation’s

Schedule A (Form 1062), as well as a copy of the section

1062 covenant. If a partner or shareholder decides to

make a section 1062 election, the partner or shareholder

will file a Form 1062, and will also complete and file a

Schedule A (Form 1062).

When and Where To File

Attach Form 1062, Schedule(s) A (Form 1062), and a

copy of the respective section 1062 covenant(s) to your

income tax return and file by the due date (including

extensions) for that return. See Date for payment of

installments, for information on when your installment

payments are due.

Note: Complete a separate Schedule A, and include a

copy of the covenant for each qualified sale or exchange

for which you are making the section 1062 election.

Definitions

Acceleration of payment. Section 1062(b)(2) specifies

circumstances that cause the acceleration of the unpaid

portion of all remaining installments. These circumstances

include the following:

• If there is an addition to tax for failure to timely pay any

installment required under section 1062, then the unpaid

portion of all remaining installments is due on the date of

such failure.

• If an individual taxpayer dies, then the unpaid portion of

all remaining installments is due on the due date of the

deceased taxpayer’s final individual income tax return for

the tax year ending with the date of the taxpayer’s death.

• If a taxpayer is a C corporation, trust, or estate, then

generally acceleration occurs upon events such as

liquidation, sale of substantially all assets, or cessation of

business (for a C corporation). In these events, the unpaid

portion of all remaining installments is due on the date of

the event.

Date for payment of installments. If a taxpayer makes

a section 1062 election, then the first installment must be

paid by the income tax return due date (without regard to

any extension of time for filing the return) for the tax year in

which the qualified sale or exchange occurs. Each

succeeding installment must be paid by the income tax

return due date (without regard to any extension of time

for filing) for each of the 3 subsequent years.

Farm. A farm includes livestock, dairy, poultry, fruit,

fur-bearing animal, and truck farms, plantations, ranches,

nurseries, ranges, greenhouses or other similar structures

used primarily for the raising of agricultural or horticultural

commodities, and orchards and woodlands.

Instructions for Form 1062 (12-2025) Catalog Number 95897L

Department of the Treasury Internal Revenue Service www.irs.gov

Farming purposes. A farm is used for farming purposes

if it is used in any of the following ways.

• To cultivate the soil or raise or harvest any agricultural

or horticultural commodity.

• To raise, shear, feed, care for, train, and manage

animals on a farm.

• To handle, dry, pack, grade, or store any agricultural or

horticultural commodity in its unmanufactured state. For

this use to qualify, the owner, tenant, or operator of the

farm must regularly produce more than one-half of the

commodity so treated.

• To plant, cultivate, care for, or cut trees or to prepare

(other than milling) trees for market.

Net income tax liability. The taxpayer’s regular income

tax liability reduced by the credits allowed under subparts

A, B, and D of part IV of subchapter A of the Internal

Revenue Code.

Qualified farmer. Any individual who is actively

engaged in farming within the meaning of 7 U.S.C.

1308-1(b) and (c).

Qualified farmland property. Real property located in

the United States that:

• Has been used by the taxpayer as a farm for farming

purposes or leased by the taxpayer to a qualified farmer

for farming purposes during substantially all of the 10-year

period ending on the date of the qualified sale or

exchange; and

• Is subject to a section 1062 covenant.

A property that is used or leased by a partnership or an

S corporation as a farm for farming purposes is treated as

used or leased by each person who holds a direct or

indirect interest in the entity.

Qualified sale or exchange. The sale or exchange of

qualified farmland property to a qualified farmer.

Section 1062 applicable net tax liability. The excess

of the taxpayer’s net income tax liability for the tax year

over the taxpayer’s net income tax liability determined

without taking into account any gain recognized from the

qualified sale or exchange.

Section 1062 covenant. A covenant or other legally

enforceable restriction that prohibits the use of real

property for any purpose other than farming during the

10-year period that begins on the day after the sale or

exchange.

Specific Instructions

Enter the total number of Schedules A (Form 1062) on

Form 1062. File a separate Schedule A (Form 1062) for

each qualified sale or exchange for which you are making

the section 1062 election.

Part I—Net Income Tax Including Gain

Recognized From Qualified Sales or Exchanges

Line 1. Enter your regular income tax (as defined in

section 26(b)) for the tax year from the applicable line of

your income tax return. For example, if you file a Form

1120, this is the amount shown on Schedule J, line 1a.

Similarly, if you file a Form 1040, this is the amount shown

2

on line 16. This amount includes the gain recognized on a

qualified sale or exchange.

Line 2. Enter on line 2 any additional regular taxes (as

defined in section 26(b)(2)). For example, if you file Form

1040, these are the taxes from Schedule 2.

Line 3. Add lines 1 and 2. This is the regular tax liability

before credits.

Line 4a. Enter any foreign tax credit from Form 1116,

Foreign Tax Credit (Individual, Estate, or Trust), Form

1118, Foreign Tax Credit—Corporations, or Schedule 3

(Form 1040), line 1.

Line 4b. Subtract the sum of lines 1, 6a, and 6b of

Schedule 3 (Form 1040) from Schedule 3 (Form 1040),

line 8 and enter the amount here.

Line 4c. Enter on line 4c any general business credits

from Form 3800, General Business Credit.

Line 4d. Enter on line 4d any other credits allowed under

subparts A, B, and D of part IV of subchapter A of the

Internal Revenue Code that is not already included on

lines 4a through 4c.

Line 4z. Add lines 4a through 4d. Enter the total on

line 4z.

Line 5. Subtract line 4z from line 3 and enter the amount

here. This is your total net income tax.

Part II—Net Income Tax Redetermined Without

Regard to Gain Recognized From Qualified

Sales or Exchanges

Part II is intended to refigure your net income tax without

regard to the gain from the qualified sale or exchange.

Line 6. Enter the taxable income for the tax year. This is

the amount from the applicable line of your return

including the section 1062 gain. For example, if you file

Form 1040, enter the amount on line 15.

Line 7. Enter the amount from Schedule A (Form 1062),

line 13. If there are multiple qualified sales or exchanges,

enter the total of recognized gains from all Schedules A

(Form 1062), line 13.

Line 8. Subtract line 7 from line 6 and enter the amount

on line 8. This is your taxable income without regard to

gain from qualified sales or exchanges. If zero or less,

enter -0-.

Line 9. Calculate your regular income tax using line 8 as

the taxable income.

Line 10. Calculate any additions to tax using line 8 as

the taxable income.

Line 11. Add lines 9 and 10 to determine your regular tax

liability.

Lines 12a–12d. Calculate your credits reported on lines

4a through 4d using line 11 as the regular tax liability.

Line 13. Subtract line 12z from line 11 and enter the

amount here. This is your net income tax determined

without regard to gain from qualified sales or exchanges.

Instructions for Form 1062 (12-2025)

Part III—Total Section 1062 Applicable Net Tax

Liability and First Installment Due

deferral of payment of tax. Therefore, do not complete Part

II and do not include this disposition on Form 1062.

Line 14. Subtract line 13 from line 5 to determine your

total section 1062 applicable net tax liability. Enter the

amount here and on the applicable line of your return. If

zero or less, enter -0-.

Partners and S corporation shareholders. If you

checked a box on line A, use the information from the

partnership’s or S corporation’s Schedule A (Form 1062)

to complete lines 1–8.

Line 15. Multiply the total section 1062 applicable net tax

liability (line 14) by 25% (0.25). Enter this amount here

and on the applicable line of your return.

Part II—Recognized Gain on Qualified Farmland

Property

Note: The actual payment of the first installment is due no

later than the due date of the return for the tax year in

which the qualified sale or exchange occurs, without

extension, even if the election is made on a return filed by

the extended due date.

Schedule A—Section 1062 Gain From

the Sale or Exchange of Qualified

Farmland Property to a Qualified

Farmer

Note: Complete a separate Schedule A and include a

copy of the section 1062 covenant for each qualified sale

or exchange for which you are making the section 1062

election.

If a partnership or an S corporation has a qualified sale

or exchange, the partnership or S corporation must

complete and file Schedule A (Form 1062) with its return.

However, the partnership or S corporation does not file

Form 1062 or the section 1062 covenant. Instead, Form

1062 and the section 1062 covenant will be filed by any

partner or shareholder who makes a section 1062

election. A partner or shareholder who makes a section

1062 election must also complete and file Schedule A

(Form 1062).

Line A. If you are a partner in a partnership or a

shareholder of an S corporation who receives an

allocation of gain from a qualified sale or exchange from

the partnership or S corporation, and you wish to make a

section 1062 election, check the box which corresponds

to the type of Schedule K-1 issued by the partnership or S

corporation which had the qualified sale or exchange.

Line B. If you checked a box on line A, enter the EIN and

name of the partnership or S corporation which issued you

the Schedule K-1.

Part I—Qualified Farmland Property Information

Lines 1–2. Enter the description of the qualified farmland

property from the sale or exchange and check the

applicable box for the type of transaction.

Line 3. Enter the date of the sale or exchange for the

qualified farmland property.

Lines 4–8. These lines are used to determine whether

the property qualifies for the deferral of payment of tax

under section 1062. If the answers to the questions on

lines 4 through 8 are “Yes,” go to Part II. If the answer is

“No” to any of the questions on lines 4 through 8, then the

sale or exchange of this property is not a qualified sale or

exchange and does not qualify for the section 1062

Instructions for Form 1062 (12-2025)

Line 9. Enter the gross proceeds from the qualified sale

or exchange. This is generally the total amount received in

the transaction, including money, the fair market value

(FMV) of any property or services received, and any

liabilities assumed by the buyer.

Line 10. Enter the net sales price of the property. The

net sales price is the gross proceeds minus any selling

expenses (such as broker’s fees, commissions, and state

and local transfer taxes).

Line 11. Enter the unadjusted basis of the qualified

farmland property.

Line 12. Enter the adjusted basis of the qualified

farmland property. The adjusted basis of the property is

the original cost or other basis increased by certain

additions and decreased by certain deductions.

Line 13. Subtract line 12 from line 10 and enter the

amount on line 13.

Note: A partnership or an S corporation that has a

qualified sale or exchange must complete and file

Schedule A (Form 1062), and must also report each

partner’s or shareholder’s share of the amount on line 13

on Form 1065, Schedule K-1, box 20, or Form 1120-S,

Schedule K-1, box 17, using code ZZ with an attached

statement. The partner or shareholder must complete a

separate Schedule A (Form 1062). A partner’s or

shareholder’s Schedule A (Form 1062) should leave lines

9–12 blank and should report on line 13 the partner’s or

shareholder’s share of the gain from the qualified sale or

exchange. The partner or shareholder should use the

information from Form 1065, Schedule K-1, box 20, or

Form 1120-S, Schedule K-1, box 17, code ZZ to complete

line 13.

Paperwork Reduction Act Notice

We ask for you to obtain the information on this form to

carry out the Internal Revenue laws of the United States.

You are required to obtain this information. You are not

required to obtain the information requested on a form that

is subject to the Paperwork Reduction Act unless the form

displays a valid OMB control number. Books or records

relating to a form or its instructions must be retained as

long as their contents may become material in the

administration of any Internal Revenue law. Generally, tax

returns and return information are confidential, as required

by Internal Revenue Code section 6103. The time needed

to complete and file this form will vary depending on

individual circumstances. The estimated burden for

individual filers is approved under OMB control number

1545-0074, tax exempt filers is approved under OMB

control number 1545-0047, business filers is approved

3

under OMB control number 1545-0123, and trust filers is

approved under OMB control number 1545-0092; for the

estimated averages, see the instructions for your income

tax return. If you have comments concerning the accuracy

4

of these time estimates or suggestions for making this

form simpler, we would be happy to hear from you. See

the instructions for the tax return with which this form is

filed.

Instructions for Form 1062 (12-2025)