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The question has been on the table for....

.....a long time here at this Forum    Has any body found that farm the evapprated and broke everybody due to the Federal Eatate Tax?

7 Replies
BA Deere
Honored Advisor

Re: The question has been on the table for....

I see you slipped the word "federal" in front of estate tax, the thing is there`s also state estate taxes and being from Minnesota you can see that.


Alot depends on the timing of when someone dies, if you`re 50 and have a big estate and your kids are in junior high, they could have to sell the family farm.   Oh I know, Don will come on and talk about giving tax free gifts every year, but when you`re building your business in your 20`s 30`s 40`s and 50`s you`re already paying college expenses and can`t be also depleting your estate.  So, if you die young, gifting and planning doesn`t help you.


The damned insurance agaents want to sell you life insurance to pay death taxes...well there you go, you have a huge expense there too.  Death tax laws change often, so lawyers get it on both ends, trying to preserve your sweat equity.


The estate tax is a tiny amount of revenue for the government, actually it`s more of a wealth redistribution tax.  Oh I get it, I`m jealous too of the BTO down the road that owns 2,000 acres and farms 20,000..I`d be green with envy if his only child inherits it all with no tax.   But, it really isn`t my business.


I`m afraid that once that jealousy can of worms is opened, it will get progressively worse.  A few years ago when the Bush estate tax expired, a $1 million exemption and 55% rate above that come into law, congress scrambled to get what we have now of the $5 million exemption.   However way too damned many politicians were happy with the 55% death tax rate and would`ve left it there.

man of steel
Senior Contributor

Re: The question has been on the table for....

This is just the very typical false narrative the leftist put out. The real question to answer is whether the tax is just and fair. And the answer to that is "No!"

Re: The question has been on the table for....

Somebody in comments said $4M on the exclusion, I think with just a bit of financial planning to break it up with the spouse it is $10.5M. I think Bernie's radical reform reduced it to $7M.


I'm not sure how many "real" farmers post here but still can't figure why anybody would be anxious that the two sons of the neighbor with a $30M net worth get every single dollar to use as a weapon to beat them to death with.


I guess if you're a landowner- basically a different function even if you're both, then maybe as it might help keep values and rents higher.


BTW- another huge issue here- no estate tax then NO basis stepup. They want it both ways, just like the people who pillaged America want no or ultra-low capital gains taxes so they can launder up the proceeds and get out clean.


For Family Farms, where presumably nary an acre will ever be sold- just more added ad infinitum-, that would actually be an acceptable compromise, but I'm thinking somehow no.


So, lotteries aside, something less than 1% of estates even end up having to file an estate tax return and considerably fewer ever pay anything. Even allowing for a few percent who maybe might expect to be there someday and a few percent more who are just delusional, seems about as cut and dried as it comes from an electoral point of view.

Re: The question has been on the table for....

Sheesh, Joe the Plumber in overalls.


There's a full marital exclusion.


You're talking a life insurance question, not an estate tax one.


I guess if the couple has a net worth in excess of $5 or $10M- depending on how prudent they were in taking care of their affairs- and they die together in an accident, then, yeah, those very wealthy children will owe some tax.


Although in the $5M category which would indicate they the parents weren't taking care of business then I'd guess that would be the least of their problems, unless there's just one little prince.


And I'm guessing in most cases he'd have his share of problems too.


The good news is that with the estate tax/basis stepup he wouldn't owe additional to the IRS when he had to sell out.



Senior Advisor

Re: The question has been on the table for....

Sure has made a lot of lawyers rich.

Re: The question has been on the table for....

Is it fair and just that heirs get the cost basis stepped up to FMV at death?


I'd also submit that it really isn't fair and just for someone who's held an asset for many years to pay CGs on original cost basis when much of the gain is probably just inflation. It should be indexed for inflation- imperfect but the best we can do and far better than nothing.


Also true that somebody who makes a killing on a short term trade should get any sort of preferential treatment- that gain should be treated as ordinary income.


Also true that retained earning should not be double taxed in estates.


Therefore, as Don has always maintained, untaxed assets should be taxed as capital gains,  indexed to inflation (with continuation of full marital exclusion) and previously taxed retained earnings should be untaxed. And then the heirs have fully earned the basis stepup.


Getting into Stump Joe the Plumber Land here, but that is what is "fairest."


After the marital deduction there probably shouldn't be much of a general exclusion  other than for a primary residence in order to be consistent with tax laws in general. Maybe a couple hundred $K, which, when you take out a primary residence would exclude two thirds or three quarters of all estates, maybe more.


Unspent qualified stuff like 401Ks, IRAs already gets its own tax treatment and given that it was put in on a tax advantaged basis I think that is fair.



Senior Contributor

Re: The question has been on the table for....

My stance has always been that if we are going to tax income, we need to tax all of it. Capital gains have been taxed but only while the seller is alive. Upon death the property passes to the heirs  and at the time of change of ownership, the asset should face the capital gains rate.


Failing that we are telling the millions of tax payers that asset owners deserve a lower rate than cash income.  It don't! that income has been sheltered from the tax man for years if not decades. Why not let the working stiff delay his income to be sheltered for 40 years?


And a ten million $ exemp[tion should be enough for anyone. Ten million with possibly 7 million in gains untaxed. I know that I have a 120 acre farm that was bought for less than $900 per acre and would sell for Nine to ten thousand $'s per acre. That is a whole lot of gains untaxed and that is only one of my properties Of course, with the ten million exemption for couples our tax burden would be zero.


Sell land to pay estate taxes or cap[ital gains? There is nothing in the constitution or the bible that says you must invest all of your dollars in farm land. You could just as well invest a couple of million in cd's so tht you would have the cash to pay them pesky taxes.


BTW those hard working employees on the factory line don't get a huge discount in taxes to accommidate them for the perils of inflation that means their paycheck won't buy as much as it used to. That tears the heck out of the claim that farm land increases are mostly inflation. I know a million will buy more today than the 100K would in 1986.