Submitted By C.J. HADLEY
*DEATH & TAXES: If Congress fails to act before Jan. 1, the Inheritance Tax (Death Tax) will revert to a $1 million exemption and a 55 percent tax on the remainder of the deceased’s estate, according to the Winter 2013 edition of RANGE magazine. (RANGE is an award-winning publication devoted to popular and unpopular environmental issues affecting Americans who live and play on the land.)
No big deal if you are rancher/media mogul Ted Turner, but the failure to act will spell disaster for the other 90 percent of the food producers whose land values have risen so rapidly that keeping track of those values are almost beyond comprehension. This is not only true of farm land values because of corn, soybean and wheat prices, but in the ranching community, urban sprawl and higher livestock prices have resulted in a dramatic spike in ranchland values.
Most of the landowners are land rich and cash poor and have very few, if any, heirs who can come up with the kind of money required by the Death Tax. The tax takes into account the current value of the estate, including, not only deeded land but also equipment, improvements, insurance policies, investments and all other possessions.
Keep in mind, the IRS does the appraisal and the tax must be paid within 90 days.
Here’s an example of the math, a 10,000-acre deeded ranch (not large for New Mexico) that will sustain 200 cows, which may have formerly been valued at $150 to $175 per acre, could now have doubled in value. Add $350,000 for the cattle and all the equipment, etc., the estate could now be worth $4.35 million, leaving a taxable estate—after the $1-million exemption—of $3.35 million at 55 percent.
Get ready to write a check to the IRS for $1,842,500, due and payable in 90 days.
What’s needed is a plan for gifting, transfers or conservation easements that can take affect before Jan. 1, otherwise, food producers who die after the New Year will leave their family with a big bill or the IRS has literally “bought the farm.”
For the complete article see the 12-21-2012 issue.
Click here to purchase an electronic version of the 12-21-2012 paper.