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Estate Taxes to End?

By Roy C Ferguson II, CMC/CAC

According to an ASFMRA bulletin on July 16th, legislation to end IRS collection of Estate Taxes has been introduced jointly by South Dakota’s Republican Senator along with Democrat and Republican House members from North Carolina and Texas. The proposed legislation is entitled the Death Tax Repeal Act of 2013.

The American Farm Bureau Federation was quick to endorse the proposed bipartisan legislation. Other agriculturally oriented organizations will hopefully lend their active support.

Even though significant tax relief was enacted during 2012 to assist farmers and ranchers cope with their future estate taxes, the Farm Bureau reportedly believes that complete, permanent repeal of all estate tax provisions is by far the best solution to protect all farms and ranches.

The newly proposed Death Tax Repeal Act of 2013 includes repealing the estate tax completely…maintaining stepped-up basis and making permanent a 35% maximum gift tax rate…plus providing a $5 million lifetime gift tax exemption indexed for inflation. Contrary to general perception, individuals, family partnerships, and family corporations own an overwhelming 98% of the nation’s two million plus farms and ranches.

Numerous examples have been recorded in which estate taxes levied on agricultural operations have exceeded Cash and Other Liquid Assets. Surviving family partners have consequently been forced to sell land, buildings, or equipment which are vitally needed to keep the agricultural business operating as a viable unit. As an inevitable result, farming and ranching operations are not only handicapped severely, but rural communities and businesses that agriculture supports are also injured financially.

The value of the vast majority of U.S. farms and ranches is commonly tied to Illiquid Assets such as land, buildings, machinery, and equipment. Thus, with approximately 85% of a typical farm’s or ranch’s Total Assets being illiquid, producers have few options when it comes to generating enough Cash to pay substantial estate taxes.

Adding to the inherent problem, recent years’ escalation of agricultural cropland’s Fair Market Values has expanded dramatically the number of farms and ranches that now exceed the existing estate tax exemption. Considering the fact that the Obama Administration is committed to boosting virtually all tax rates considerably higher, Estate Taxes will almost certainly become even more burdensome unless some legislation at least similar to the Death Tax Repeal Act of 2013 is passed by Congress. Even then, prospects of a Presidential Veto remain substantial. From The Ferguson Ag Report, Copyright 2013.