2.__Consideration.__The amount realized from the sale or exchange is the full actual consideration paid or to be paid, including the amount of any liens or encumbrances on the land not removed by the sale or exchange.__The amount realized from the sale or exchange is the gross amount reduced by any expenses of sale and commissions.__If a sale includes land and buildings or other structures, the amount realized must be allocated between the land and the buildings or other structures on the basis of fair market value.

3.__Gain subject to penalty.__The gain subject to penalty from the sale or exchange of land for timber harvesting is the amount realized from the sale or exchange of land, including the amount realized from the sale of timber or timber rights, minus the basis of the land as determined under subsection 1.

The penalty on the gain under this subchapter from the sale or exchange of land for timber harvesting may not be reduced by any losses incurred in other transactions.

4.__Holding period.__The land for timber harvesting sold or exchanged is deemed to have been held as determined under the Code.__If a person's holding period is claimed by the seller or exchanger, the holding period may not exceed the time that that person had actual and recorded title to the land in that person's name and includes the time the land was held prior to the effective date of this subchapter.__If a husband and wife are tenants by the entirety there may be added to the holding period the amount of time the land was held by one spouse alone before that spouse created the tenancy by the entirety.__ Notwithstanding any other provision to the contrary under the Code, if a tenancy by the entirety is dissolved by reason of death or divorce, the holding period during the tenancy by the entirety is added to the holding period of the spouse subsequently owning the property in the spouse's own name.__ For the purposes of this subsection, land devised to or inherited by a surviving spouse or land awarded to a spouse upon dissolution of marriage is treated as though it was held by husband and wife as tenants by the entirety.__If the land is a gift, the holding period of the donee must include the time that actual and recorded title was held by the donor.

Notwithstanding any other provisions of this subsection, land acquired from a decedent or an estate or sold by an estate has a holding period commencing as of the date of death of the decedent and its basis is the fair market value of the property as of the