Minding Ag's Business

Story Book Endings for Estate Taxes



There's a happy ending for farm owners whooften go through years of planning and family turmoil to minimize their death taxes: By USDA's estimates, only 2.7% of farm estates owed federal taxes in 2014. That figure is down considerably in the last 15 years, thanks in part to efforts by Congress to raise the estate tax exemption from a modest $675,000 per person in 2000 to $5.43 million in 2015.

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I'm speculating here, but suspect those low tax hits are no accident. Remember, farmland values have ballooned so fast since 2000, it's not unusual for a modest, 70-year-old Iowa farmer with 2,500 acres to have amassed a $20 million estate. If farms that size escape federal taxation, it's only because they had the sense to begin estate planning, buy life insurance and transfer ownership of assets years--and even decades--ahead of a death.

By studying tax returns, USDA's Economic Research Service found the average farm estate that owed Federal estate tax had a net worth of $11.1 million and a tax liability of $1.68 million, paying an average tax rate of 15%. Large-scale family farms--those defined by gross sales in excess of $1 million annually--owed $2.223 million on average, however.

One surprising factoid: While very, very few wealthynonfarmers ever owe estate taxes, nearly one out of every six taxable estates in the US held some farm assets in their names at death. The average amount of farm property totaled $2.8 million. Do wealthy people just own land or do farm landowners get hit with a disproportionate amount of tax?

What the recent ERS report failed to note was that more than a dozen states impose their own form of death taxes, some with exemptions as low as $675,000. So failure to consult a professional planner can have serious ramifications, even if your federal estate return owes IRS nothing.

I'll be taking notes when several hundred tax practitioners gather in Indianapolis July 14-15 for the American Institute of CPAs annual agricultural conference. Estate and succession planning highlight the agenda. If you have questions you'd like to pose the experts, please send them my way or register yourself at http://www.cpa2biz.com/…


Follow me on Twitter@MarciaZTaylor

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