Agricultural Tax Reform Act of 1985

Agricultural Tax Reform Act of 1985 - Amends the Internal Revenue Code to reduce the amount of the investment tax credit for farm property of a taxpayer not primarily engaged in farming.

Excludes from the minimum tax any gain realized on the sale of farm property sold to satisfy the indebtedness of an insolvent farmer.

Treats losses attributable to the trade or business of farming as an item of tax preference for purposes of the minimum tax.

Disallows an investment tax credit for a single purpose agricultural structure. Disallows capital gains treatment for any gain realized on the sale of a single purpose agricultural structure.

Repeals the income tax deduction for expenditures by farmers for clearing land.

Allows an additional investment tax credit for soil or water conservation expenses incurred for irrigation property and conservation improvements by a taxpayer engaged in the business of farming. Sets the amount of such credit at ten percent of such expenses (in addition to the regular percentage allowed for the investment tax credit).