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TITLE 26-INTERNAL REVENUE CODE (A) the applicable percentage 4 gregate of the deductions allow sections 175 (relating to soil and servation expenditures) and 182 (r expenditures by farmers for clea for expenditures made by the after December 31, 1969, with resp farm land or (B) the excess of- (i) the amount realized (in th sale, exchange, or Involuntar sion), or the fair market value o land (in the case of any other di over (ii) the adjusted basis of such] shall be treated as ordinary inco gain shall be recognized notwithsta other provision of this subtitle, ex this section shall not apply to the e tion 1251 applies to such gain. (2) Farm land For purposes of this section, the ti land" means any land with respect deductions have been allowed unde 175 (relating to soil and water co expenditures) or 182 (relating to exi by farmers for clearing land). (3) Applicable percentage For purposes of this section- If the farm land Is disposed of- Within 5 years after the date it was acquired. Within the sixth year after it was acquired. Within the seventh year after it was acquired. Within the eighth year after it was acquired. Within the ninth year after it was acquired. 10 years or more years after it was acquired. Th per (b) Special rules Under regulations prescribed by tary, rules similar to the rules of se shall be applied for purposes of this s (Added Pub. L. 91-172, title II, § 214(E 1969, 83 Stat. 572, and amended Pub. title XIX, §§ 1901(b)(3)(K), 1906(b)(1 4, 1976, 90 Stat. 1793, 1834.) AMENDMENTS 1976-Subsec. (a)(1). Pub. L. 94-455, § 19 substituted "ordinary income" for "gain fr or exchange of property which is nelth asset nor property described in section 123: Subsec. (b). Pub. L. 94-455, § 1906(b)(13 out "or his delegate" following "Secretary' EFFECrIvE DATE OF 1976 AmENwsn Amendment of subsec. (a)(1) I 1901(b)(3)(K) of Pub. L. 94-455 effective years beginning after Dec. 31, 1976, see sec of Pub. L. 94-455, set out as an Effective I Amendment note under section 2 of this tit EFcFTIv DATE Section 214(c) of Pub. L. 91-172 provided amendments made by this section (enact tion] shall apply to taxable years beginni cember 31, 1969." of the ag- ted under water con- relating to ring land) taxpayer &4 .4. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to In sections 170, 301, 312, 341, 453, 751 of this title. § 1253. Transfers of franchises, trademarks, and trade names ;C U 0 e (a) General rule A transfer of a franchise, trademark, or trade name shall not be treated as a sale or exchange case of a of a capital asset if the transferor retains any ythe farm significant power, right, or continuing interest f te n, fam with respect to the subject matter of the fran- sposition), chise, trademark, or trade name. land, (b) Definitions me. Such For purposes of this section- nding any (1) Franchise ccept that The term "franchise" includes an agree- extent sec- ment which gives one of the parties to the agreement the right to distribute, sell, or pro- vide goods, services, or facilities, within a erm "farm specified area. to which (2) Significant power, right, or continuing Interest er sections The term "significant power, right, or con- nservation tinuing interest" includes, but is not limited penditures to, the following rights with respect to the in- terest transferred: (A) A right to disapprove any assignment of such interest, or any part thereof. (B) A right to terminate at will. he applicable (C) A right to prescribe the standards of rcentage In- quality of products used or sold, or of ser- lOO percent. vices furnished, and of the equipment and 80 percent. facilities used to promote such products or services. 60 percent. (D) A right to require that the transferee sell or advertise only products or services of 40 percent. the transferor. 20 percent. (E) A right to require that the transferee purchase substantially all of his supplies 0 percent. and equipment from the transferor. (F) A right to payments contingent on the productivity, use, or disposition of the sub- ject matter of the interest transferred, if the Secre- such payments constitute a substantial ele- ction 1245 ment under the transfer agreement. ection. (3) Transfer a), Dec. 30, The term "transfer" includes the renewal of L. 94-455, a franchise, trademark, or trade name. 3)(A), Oct. (c) Treatment of contingent payments by transferor Amounts received or accrued on account of a transfer, sale, or other disposition of a fran- 01(b)(3)(K), chise, trademark, or trade name which are con- rom the sale tingent on the productivity, use, or disposition er a capital of the franchise, trademark, or trade name 1". transferred shall be treated as amounts re- )(A), struck ceived or accrued from the sale or other disposi- tion of property which is not a capital asset. MT (d) Treatment of payments by transferee y section (1) Contingent payments for taxable Amounts paid or incurred during the tax- tion 1901(d) able year on account of a transfer, sale, or )ate of 1976 other disposition of a franchise, trademark, tie. or trade name which are contingent on the productivity, use, or disposition of the fran- I that: "The chise, trademark, or trade name transferred ing this sec- shall be allowed as a deduction under section ng after De- 162(a) (relating to trade or business ex- penses). 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