The U.S. Senate recently passed a bill, HR 2419, originating in the U.S. House of Representatives, that would disqualify like-kind exchanges of "improved real estate" with "unimproved real estate."
The National Association of Realtors sent a letter to the full Senate noting that the proposal has the effect of depriving many farmers of any opporunity to use the exchange technique to reconfigure their holdings. The bill is now before a joint House-Senate conference committee to discuss differences in the language of legislation as passed by the two houses of Congress.
The change comes as a result of Congress' interest in "paying for" several incentives that would preserve wildlife habitats. This provision in the 2007 farm bill would not allow the owner of an improved investment property to use a tax-deferred exchange to acquire unimproved farm land. Similarly, owners of unimproved farm land could not exchange it for improved investment property. Unimproved agricultural real property is defined as land owned by aperson engaged in a farming business who receives specified commodity payments associated with the land.
I'll keep on eye on HR 2419 and let you know the results of the conference committee meetings.