Other Farm Property This section discusses gain on the disposition of farm land forwhich you were allowed either of the following. Deductions for soil and water conservation expenditures(section 1252 property). Exclusions from income for certain cost sharing payments(section 1255 property). Section 1252 property.If you disposed of farm land you held less than 10 years at a gainand you were allowed deductions for soil and water conservationexpenses for the land discussed in chapter 6,you must treat part ofthe gain as ordinary income and treat the balance as section 1231gain. Amount to report as ordinary income.You report as ordinary income the lesser of the following amounts. The total deductions allowed for soil and water conservationexpenditures multiplied by the applicable percentage, discussednext. Your gain (determined by subtracting the adjusted basis fromthe amount realized from a sale, exchange, or involuntary conversion,or the fair market value for all other dispositions). Applicable percentage.The applicable percentage is based on the length of time you heldthe land. If you dispose of your farm land within 5 years after thedate you got it, the percentage is 100%. If you dispose of the landwithin the 6th through 9th year after you got it, the applicablepercentage is reduced by 20% a year for each year you hold the landafter the 5th year. If you dispose of the land 10 or more years afteryou got it, the percentage is zero (0), and the entire gain is asection 1231 gain. Example.You acquired farm land on January 19, 1992. On October 3, 1999, yousold the land at a $30,000 gain. Between January 1 and October 3,1999, you make soil and water conservation expenditures of $15,000 forthe land that are fully deductible in 1999. The applicable percentageis 40% since you sold the land within the 8th year after you got it.You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinaryincome and the $24,000 balance as a section 1231 gain. Section 1255 property.If you receive certain cost-sharing payments on property and youexclude those payments from income (discussed in chapter 4),you mayhave to treat part of any gain as ordinary income and treat thebalance as a section 1231 gain. If you chose not to exclude thesepayments, you will not have to recognize ordinary income under thisprovision. Amount to report as ordinary income.You report as ordinary income the lesser of the following amounts. The applicable percentage of the total excluded cost-sharingpayments. The gain on the disposition of the property. You do not report ordinary income under this rule to the extentthe gain is recognized as ordinary income under sections 1231 through1254, 1256, and 1257 of the Internal Revenue Code. However, you doreport as ordinary income under this rule a gain or a part of a gainregardless of any contrary provisions (including nonrecognitionprovisions) under any other section of the Internal Revenue Code. Applicable percentage.The applicable percentage of the excluded cost-sharing payments tobe reported as ordinary income is based on the length of time you holdthe property after receiving the payments. If the property is heldless than 10 years, the percentage is 100%. After 10 years, thepercentage is reduced by 10% a year or part of a year until the rateis 0%. Form 4797, Part III.Use Form 4797, Part III to figure the ordinary income portion of again from the sale, exchange, or involuntary conversion of section1252 property and section 1255 property.