Farm Debt Tax Reform Act of 1989

Farm Debt Tax Reform Act of 1989 - Amends the Internal Revenue Code to exclude from gross income up to $350,000 (lifetime total) of capital gain from the transfer of property in complete or partial satisfaction of qualified farm indebtedness of a taxpayer: (1) whose modified gross income is below the national median adjusted gross income; (2) whose gross receipts for three of the preceding five years are at least 50 percent attributable to farming; and (3) whose equity in all property held after the transfer in question is less than the greater of $25,000 or 150 percent of income tax liability.

Applies a comparable exclusion with respect to the discharge of qualified farm indebtedness of solvent farmers who meet these requirements and whose indebtedness both before and after the relevant transfer equals at least 70 percent or more of equity.

Permits both tax exclusions retroactively with respect to taxable years 1987 and thereafter.