Tax Fairness for Farmers, Ranchers, and Small Businesses Act

Tax Fairness for Farmers, Ranchers, and Small Businesses Act - Amends the Internal Revenue Code to permit a limited, one-time exclusion from gross income of up to $500,000 ($250,000 in a separate return of a married individual) of the gain from a single sale or exchange to a qualified buyer of qualified property. Defines "qualified property" as property that has been used by a seller over 55 years of age, or a family member, in farming or in a closely held business throughout the ten year period ending on the sale or exchange date. Defines "qualified buyer" as a buyer who is a lineal descendant of the seller, or a beginning farmer or rancher. Requires the seller to pay recapture taxes if within ten years after the sale or exchange the property is no longer used for the same farming or business purpose, unless the buyer is bankrupt or the initial income exclusion failed to reduce the seller's net tax. Increases from 30 percent to 100 percent the deduction for health insurance costs of self-employed individuals. Allows the carryover of unused personal exemptions and standard deductions for an individual whose income for the previous three years is at least 50 percent derived from engaging in continuous and substantial farming. Eliminates the possession tax credit granted income from sources within one of the U.S. territorial possessions. Alters the tax liability of a U.S. citizen who relinquishes his or her citizenship by considering certain property held at the time of relinquishment as sold at fair market value in order to tax any gain on that property. Requires that this additional taxed income: (1) be offset by a $600,000 exclusion from gross income; and (2) not include the value of U.S. real property (other than stock of a U.S. real property holding corporation), or any interest in certain specified domestic or (up to $500,000) foreign retirement and pension plans.