Farm tax specialist concerned for farmers who don’t have next generation waiting in the wings
President Biden’s American Families Plan includes provisions to protect family farms and small businesses from capital gains taxes as long as heirs continue to operate the farm or business.
But Chad Hansen with farm accounting firm Corporate Farmer in Mason City, Iowa tells Brownfield he’s concerned for those who retire without the next generation planning to take over.
Hansen uses the example of a landowner with 1,000 acres.
“Around here that could be $10 million dollars-worth of land, and (there could be) some buildings worth a couple hundred-thousand, equipment, and grain. At their death, what could that potentially mean for their son or daughter down the road as far as what that tax liability could be?”
Biden’s proposal eliminates stepped-up basis, which allows land and other investments to pass from one generation to the next without capital gains taxation at the time of death.
“So in a case like that, unfortunately it may mean they would have to sell some or all of the property in order to cover the tax liability. Or else they’re going to have to have a pretty good and understanding banker to help them with that.”
Hansen says there are still many questions to be answered, but he’s using this scenario to show how scary the situation could be for some families.