The current exemption is $12.92 million. It went UP another $850k this year. It doubles for husband/wife ($25.84 million) and the surviving spouse gets carryover if the full amount isn't dispersed after the first spouse passes. There is no way the whole 1500 acres in your hypothetical farm is being sold to cover taxes.
Also, if the heirs are willing to accept less in step-up basis, the land can be valued lower and clear probate. I'm speaking from experience as a close family member recently passed away with 1400+ acres.
And in that scenario, none of it is being sold.
1500 acres is an outlier farm by the way. The average size in Iowa in 2020 was 360 acres.
Interesting & good post.
Isn’t the exception slated to get cut in HALF in just a couple years? I believe it’s going down to $6.5-ish.
On the other hand of this….. I personally know a PILE of people who have needed to sell farms to pay the taxes. A pile!!!!
1500 acres is almost never in one block either. It’s often in multiple small Tracts like 160’s, etc.
Why should these folks have to sell to pay the GOVERNMENT (again)???
Especially in this market where prices on paper went up “40%” in couple years.
Made up example that’s replicated a gazillion times….
Folks N of Des Moines buy land with AFTER TAX DOLLARS in ‘70’s & 80’s. Spend 40 years buying land. Let’s say they paid “$3k an acre”. & because of inflation & rising prices, it’s now worth $20k. & it’s 2,000 acres. Again- yes, that’s a ton of land BUT…. It took them a lifetime to do it!!! They had to do this:
1) pay taxes on their income - use their after tax $ to buy the land
2) pay taxes on the land that also rose over time
3) paid serious amounts of interests to the banks
4) had to spend their life working the land & probably worked their bodies to the core on the land farming it.
5) had a lot of years in there where they didn’t make $ & lost $ some years farming.
On & on …….
Probably middle class people & many of which didn’t have college educations. Spend their whole lives doing this. At the end of their lives… they want to give it to keep it in their family…. SHOULD THEY BE ABLE TO DO THAT OR NOT??
This isn’t about myself or anyone I know. This is about the system of taxation & the ramifications I mentioned above (which results in segmentation, development or corporate farmers getting larger). This is bad for: environment, family farms, motivation to work hard your whole life, century farms, etc etc. It’s fundamentally wrong IMO on top of it. This is all in the name of the bloated GOVERNMENT getting more $ from the people after they took half of it to begin with. It’s easy to dismiss “it’s just those rich people” but that’s a flawed response. All the while - government’s buddy system with the truly super rich & biggest companies don’t have the liabilities these farmers do. It’s wrong. IMO.