SALE OF LAND WITH UNHARVESTED CROP.

SEC. 323. SALE OF LAND WITH UNHARVESTED CROP. (a) Treatment of Gain or Loss.—Section 117 (j) (relating to sale or exchange of property used in the trade or business) is hereby amended— (1) By inserting immediately before the period at the end of the second sentence of paragraph (1) thereof the following: “and unharvested crops to which paragraph (3) is applicable”; and (2) By adding at the end thereof a new paragraph to read as follows: “(3) Sale of land with unharvested crop.—In the case of an unharvested crop on land used in the trade or business and held for more than 6 months, if the crop and the land are sold or exchanged (or compulsorily or involuntarily converted as described in paragraph (2)) at the same time and to the same person, the crop shall be considered as ‘property used in the trade or business’.” (b) Treatment of Deductions.— (1) Amendment of section 24.—Section 24 (relating to items not deductible) is hereby amended by adding at the end thereof a new subsection to read as follows: 65 Stat. 501 “(f) Sale of Land With Unharvested Crop.—Where an unharvested crop sold by the taxpayer is considered under the provisions of section 117 (j) (3) as ‘property used in the trade or business’, in computing net income no deduction (whether or not for the taxable year of the sale and whether for expenses, depreciation, or otherwise) attributable to the production of such crop shall be allowed.” (2) Amendment of section 113 (b) (1).— Section 113 (b) (1) (relating to adjustments to basis) is hereby amended by adding at the end thereof a new subparagraph to read as follows: “(L) for deductions to the extent disallowed under section 24 (f), notwithstanding the provisions of any other subparagraph of this paragraph.” (c) Effective Date.—The amendment made by subsection (a) shall be applicable only with respect to sales, exchanges, and conversions, occurring in taxable years beginning after December 31, 1950. The amendments made by subsection (b) shall be applicable to any taxable year for which a deduction is disallowed by reason of sales, exchanges, or conversions to which subsection (a) is applicable.