- 13 -
The bill does not change the present law requirement
that a qualified use be an active trade or business use
as opposed to a passive, or investment use.
For example, if a decedent has leased otherwise
qualified real property to a son pursuant to a net cash
lease, and the son conducts a farming operation on the
property, the son's business use is attributed under
the bill to the decedent for purposes of satisfying the
qualified use requirement (sec. 2032A(b)(1)). On the
other hand, during any period when the decedent leases
the real property to a nonfamily member for use in a
qualified use pursuant to a lease under which the
rental is not substantially dependent upon production,
the qualified use requirement is not satisfied. [Fn.
ref. omitted.]
With this amendment, Congress acknowledged that a decedent may
become ill or disabled in the years immediately preceding death.
Permitting a family member to farm the property prior to a
decedent's death facilitates an orderly transition of ownership.
H. Conf. Rept. 97-215, at 248 (1981), 1981-2 C.B. 481, 507-508;
S. Rept. 97-144, supra, 1981-2 C.B. at 463-464. The committee
reports to the 1981 amendment state, however, that the new
provision did "not change the present requirement that the
qualified heir owning the real property after the decedent's
death use it in the qualified use throughout the recapture
period." S. Rept. 97-144, supra, 1981-2 C.B. at 464; H. Rept.
97-201, supra, 1981-2 C.B. at 382. Thus, post-death qualified
use remained person- and activity-specific. See Shaw v.
Commissioner, T.C. Memo. 1991-372.
ERTA did make one change as to post-death qualified use. It
enacted a 2-year grace period after decedent's death during which
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011