The Biden administration’s “American Families Plan” would tax inherited land at capital gains rates as a sale. That would curtail childrens’ ability to inherit a farm with a new tax basis “stepped up” to current market value. Inheriting free of capital gains tax has been in effect since 1921.
May 6, 2021 The proposed tax law would drastically curtail families’ freedom to bequeath substantial farmland assets to heirs.
Yesterday, Kristine Tidgren, director of the Center for Agricultural Law and Taxation at Iowa State, published a revealing explanation of the tax proposals, and we encourage you to study her report for details available so far.
Tidgren says “The fate of small businesses and family farms faced with large tax bills at transfer, and the difficulty inherent in carving out equitable and workable exceptions, has prevented this approach from gaining much acceptance in the past.”
But that past … is history. The Biden Administration’s intentions are clear: It’s focused on raising federal revenue and imposing tax laws for wealth redistribution it deems “equitable.”
The Administration has so far released only summaries of its taxing intentions, not the final legislation.
Another provision in the American Families Plan would eliminate tax-deferred exchanges of real estate. This would drastically curb the ability of landowners to transfer equity from one farm to another — such as trading a highly appreciated 80 acres ripe for development into working farmland farther from expanding urbanization. Fox News has a condensed explanation of this.
We encourage you to read Tidgren’s analysis, A Look at the American Families Plan. Print and study it. These changes, if passed into law, would have far-reaching impacts on the ability of families to preserve efficiently sized landholdings for the future.
We seldom report on farm tax issues, leaving that to other ag media. But this overhaul imposes long-term negative impacts on farm infrastructure.