In my situation I am not leaving the land to anybody as I have no heirs and this was more retirement investment so my thought was it’s a wash on the capital gains we’d pay selling this farm without a 1031 and then just paying off the other two farms with the remaining proceeds that we pay nearly 80K a year in interest on. We’re in no rush. I was just running a few scenarios in my head. Hopefully we do have an opportunity to roll over into something in the 600-800 acre contiguous range some day but I don’t wanna blow all my equity either if it’s way overpriced.
I do have to admit, though, after reading that thread on the state of Iowa hunting currently I’m not sure if I want to risk giving up what we have here And overpaying for something somewhere else and being in the same situation. I don’t think if you have 600 acres contiguous it’ll mean anything anymore if you have 10 new neighbors surrounding you with 40 acre parcels that just got broken up and sold off!
Brett Morris
PMA Member
Butch that strategy isn't bad if you plan to liquidate anyway. Capital gain rates are historically low right now so that's a huge positive for you. Depending on the size of the sale if you could split the capital gains into two years it might be a big deal for tax savings. It also might not make a lick of difference lol
Brett Morris
PMA Member
Butch that strategy isn't bad if you plan to liquidate anyway. Capital gain rates are historically low right now so that's a huge positive for you. Depending on the size of the sale if you could split the capital gains into two years it might be a big deal for tax savings. It also might not make a lick of difference lol
I did not know you can do that. I’ll definitely have to dig in a little more. Thanks!
This is a buddy of mines take on things. He would rather pay it now while its historically low rather than chance what it could be in 15-20 years. He also is of the mindset he would like to remain more liquid in the future to keep his options open on where he spends his money, it may not be land.
I also like the option if we have those other farms paid off we don’t have to have every single acre rented out in order to help pay the bills. I read somewhere or I think Kip Adam’s told me at that steward course that the worst thing for a deer hunting property is to run cattle through it. I’d be OK with not renting out our pastures and letting it grow in for sure!
You might want to check local laws but in some states if you let your ag land, including pasture set Idol for 2 years or more, the state can start charging you property taxes at actual value versus agricultural value!
Self directed IRAs are another really good tool to push off taxes if you can convert land ownership there. Unlike a 1031, funds can just sit there in a cash account without deadlines on reinvesting.
Can you explain this a little further? My son sold his small acreage ( closes soon) and hasn't seen anything he likes yet. He was planning on doing 1031 which means he has 45 days from the day of closing to ID a property if we understand correctly.
What are some cliff note details on the IRA route?
You can own farms in an IRA. When you sell them the money goes back to the IRA. You can defer taxes like a 1031 but without the deadlines on reinvestment.
This would not apply in your son's case as he sold it as an individual.
There are limitations to self directed IRAs you should familiar yourself with if you considered it on the future.
Thank you!
Windlooker
Well-Known Member
I would research/google/chat gbt uses of your land held in a self directed Ira. If the property is an income producing property only ie ag land it makes sense but if it’s intended use is rec by you, it doesn’t.
Hardwood11
It is going to be a good fall!
If you buy a farm with an IRA, the IRS has restrictions on how much you can use the farm . They don’t like CRP in a Self Directed IRA (at least not in my case they didn’t ) …
Farm land & timber are options. I wouldn’t put a blind on it, in case an IRS agent drives by or checks on it … which is highly unlikely, but I suppose it has happened.
Farm land & timber are options. I wouldn’t put a blind on it, in case an IRS agent drives by or checks on it … which is highly unlikely, but I suppose it has happened.