As several of you know, I have real concerns about components of potential tax legislation especially when it comes to the impact on family farms in rural America. While nothing is a lock at this point, I consistently read/hear about a potential "transfer tax.' Let me emphasize here - I want to find that middle ground between "the sky is falling" and "don't worry about it - there's nothing to see here." Super short and definitely incomplete version, but just to give an idea - if an individual passes in a year after this potential legislation would pass, assets could be treated as if they were sold at date of death. That "as if" thing... meaning if a farm family patriarch for example passes owning 400 acres at date of death worth $10,000 per acre, let's assume zero basis for purpose of the illustration and a $1,000,000 exemption (which may or may not be real - again this is hypothetical) - there would be a potential gain of $3,000,000. With proposed capital gains rate changes and state taxes, let's suggest a combined tax rate of 40% which would result in total tax of $1,200,000. One potential provision of the proposed legislation as I understand it is under certain circumstances the tax could be paid over 15 years. I've read with some bemusement that this essentially makes the tax 'no big deal' for affected taxpayers. Ummmmm... under this illustration, that would still be an additional $80,000 per year for 15 years, which to me is kind of a big deal. And let's be clear - we're talking land... not an asset which can be readly converted to cash. So what to do? I read an article from Accounting Today this morning which seems on point in conjunction with recent conversations I've had. "... Rather than recommending tax planning, I would say "posturing for tax planning'... I don't think you want to start down the path of any of those options because the landscape could change dramatically between now and the time it enters into law." So short version? It seems fair to say something's coming. It also seems fair to say we don't know what it is and don't know exactly when it's coming. So with those two variables, good luck to all of us in planning effectively. Again, my goal is not to imply the sky is falling, but I'm all about doing everything I can to help us avoid/minimize surprises. Questions? Me too!! But let's talk! Know that you're not alone and there are resources available to help us all through this time.
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