Farmers worried about tax increases that would take effect Jan. 1 if Congress can't compromise on the so-called fiscal cliff have helped lead to a frenzy of farmland sales this fall. The worries about possible increases in capital gains and estate taxes are adding to the normally busy time for farmland sales after harvest in Iowa and Nebraska.
With the Fiscal Cliff looming with each passing day to 2013, family farms may be the latest casualty.
So, what’s the big deal? Why the flurry of family farm sales in 2012?
Some background is required to appreciate the problem. The perennial tax problem stalking family farms is that they are “illiquid assets.” The land is itself the primary asset enabling family farmers to make a living. Accordingly, when the land is sold there can be hefty taxes to pay. To make matters worse, if the death tax exemption drops to $1 million in 2013, then the heirs may be forced to sell the land just to pay the taxes.
More than a few news sources have shed light on this dilemma recently, to include the San Francisco Chronicle in an article titled “Farmland sales [are] brisk because of tax law changes.”
While the reality of the Fiscal Cliff is not good for farming families, it’s also not good for anyone owning real estate or other illiquid assets.
Going forward, do you have any illiquid assets or legacies worth leaving that require protection? Take a lesson from those that have already gotten to work: this takes action and forethought.
Reference: SFGate (San Francisco Chronicle) (November 25, 2012) “Farmland sales brisk because of tax law changes”