Minnesota Farms for sale now.
January 31, 2021 By WANDA PATSCHE
I was stunned as anyone when I read about the new Biden administration’s proposed changes to the capital gains tax and stepped-up basis. The intended capital gains tax will increase to 39.6%, the highest capital gains increase in U.S. history. In addition, it would NOT include a step-up basis. So what does this mean and how will this affect the family farm?
Typically, capital gains tax is the tax assessed on the profit (the difference between the value of when the property was originally purchased to when it is inherited or sold) when selling a piece of land, property, or a business. A stepped-up basis is the revaluing of an asset at the time of death and/or purchase to the current value. For example:
I don’t believe so. Don’t get me wrong, I understand there will be increased taxes. Elections have consequences. We all expected new/higher taxes with the new administration. In addition to the capital gains tax, there are also state and federal estate taxes and President Biden wants to decrease the federal exemption by half. More taxes.
What is heartbreaking is the notion that as a family farmer, we have spent years and years growing our farm with the hopes to pass it on to our family someday. We have poured our life into starting and growing our farm. Knowing all the hours, stress (both emotional and financial) and risk it took to build our farm, I feel disappointed that individuals in our government want such a big portion of our farm when we pass. Is this fair? How will our family keep the farm going? Simply, they won’t be able to. And this makes me both sad and angry. The government has no right to nearly 40% of our farm’s value.
As farmers, we are a very small percentage of the population. Our voice continues to shrink. It is up to us and our farm organizations to reach out to our elected officials and put a stop to this proposal. It’s very difficult because people who make these proposals have probably never put one foot on a farm and have absolutely no idea what it’s like to farm. We must ask ourselves, do we as a country want family farmers in our future? Do we want our family to continue in our footsteps? It will not happen if we allow these proposals to go forward. We need to ask our legislators to eliminate these proposals.
It’s imperative that we all use our voices to contact our legislators. Do I believe at the end of the day there will be changes to the proposed changes? I certainly hope so. If not, this country’s agriculture will no longer be recognizable and we will lose a major thread of American rural and farm life. We need to remember farmers are the people who feed us. Search this website to contact your congressman.
“The great searcher of human hearts is my witness, that I have no wish, which aspires beyond the humble and happy lot of living and dying a private citizen on my own farm.”
— GEORGE WASHINGTON
By Jim Mundorf
I don’t care who you voted for, or your thoughts on the election. Joe Biden is the President and as much as I try to stay out of politics, his proposed tax plan is now the greatest threat to destroy family owned farms and ranches that America has ever seen. According to Farm Progress Magazine, “Biden has two features in his(estate tax) plan, and one is unfortunate, but the other is disastrous for farmers.”
Over the past 20 years agriculture land prices have skyrocketed. In my neighborhood, (southwest Iowa) farm ground has went from around $900 per acre in the 90s to well over $7,000 per acre now. Farms that were were a few hundred thousand, 25 years ago, are now worth millions. So farmers have found themselves in a unique position. If they own the land they work on, they can keep working for an unstable living that is always dependent on the weather and markets, or they could sell out and become multi-millionaires. For most people this seems like it would be an easy decision. For most farmers they don’t think twice about it…they stay, and keep working.
So why do they keep it? A big reason for keeping the farm has always been to pass it on. And now that there are fifth, sixth, and seventh generation farmers and ranchers around. Passing the farm down to the next generation has become a sacred tradition. The end goal of a life’s work. As Paul Harvey says at the end of his speech, turned commercial, “Somebody who'd bale a family together with the soft strong bonds of sharing, who would laugh, and then sigh, and then reply, with smiling eyes, when his son says he wants to spend his life 'doing what dad does… So God made a farmer.”
Unfortunate- The “unfortunate” part of Biden’s proposed tax plan is the elimination of the, stepped-up basis. The stepped-up basis has been used for all inheritance for generations. How it works, is when property is inherited, it doesn’t matter what the dead person paid for it, the value is stepped-up to what it is worth at the time of the death. This allows the person who is inheriting the property to show no gain in income from the inheritance.
Biden’s tax plan would remove the stepped-up basis. According to the Forbes article, Biden’s Tax Increase On Death That No One Is Talking About, “Biden's tax plan calls for carrying over an asset’s tax basis from the the decedent to the next generation. No amount of estate tax exemption would help you, because this is a big income tax increase.” That income tax increase would destroy practically all small family run farms, because it would simply be too much to pay without selling out.
Example- Lets say you are the son or daughter of a farmer and have worked your whole life on your fathers farm with the hopes of taking it over when he kicks the bucket. Your Dad inherited a portion of the farm from Grandpa in the 1990’s, and he bought his brothers and sisters out for $900 per acre. His dreams have come true, and he now he owns a thousand acres that you guys farm together. Now that land prices have shot up, his farm is now worth $8,000 per acre. When Dad croaks, with the stepped up basis in place, the value of your farm is stepped up to current land values when you inherit it, and no gain in income is shown. Under Biden’s plan the stepped up basis is gone, and you are looking at showing a gain of income that is the difference between the price of the land when your Dad bought it and the price it is now. On 1,000 acres you are now showing a gain of $7.1 million dollars.
Disastrous- Right now you can only pay taxes on inherited property that you sell. The truly, “disastrous,” part of Biden’s the plan for farmers, and everyone else, is combining the removal of the stepped-up basis with taxing, “an asset’s unrealized appreciation at transfer,” meaning you will be taxed on the value of inherited property whether you sell it or not.
Multiple sources put this tax under capital gains, but the Forbes article cited above, calls it an, “income tax increase.” Either way, since Biden also plans to raise capital gains taxes to the highest income tax level, under his plan it would be taxed the same, 39.6%. So, using the above example, for a farm you were able to make a modest living on, you now owe the Federal Government $2,811,600. For most farmers there is only one way to pay that bill, and that’s to sell. Now in order to keep your farm, you will have to sell off 40% of it to pay the Government. What you are left with is a farm that can no longer support your family.
Consequences- Its hard to figure how big of an impact such a massive change would make. It seems obvious that large corporate farms would definitely get bigger and small family run farms would cease to exist. Last week it was reported that Bill Gates is the largest owner of farm land in the U.S. Amazon’s Jeff Bezos is also buying up land. Taxing farm families out of business, so tech nerds can buy it up seems like it would be unpopular politically, but since Biden is practically a lame duck because of his age, if that’s what he wants to do, what’s stopping him?
I might be a little biased when it comes to this subject. At some point in my life, hopefully in the far distant future, I will probably inherit a portion of my parents farm. They bought it in the 80’s. They had saved their entire lives and purchased it long before they had inherited anything. Since buying the farm both of my parents have inherited portions of their parents farms. My father’s was started in 1874 by his Great Grandfather. My mother’s was purchased by her father after he returned from fighting in Japan in the late 40’s. For my entire life I have watched my Grandparents, parents, friends, and neighbors, work, care for, and build up farms, with the goal of passing them on to their children. At any point in the past 20 years my parents could have sold the farm and done anything in the world that they wanted to do, but they are right where they want to be.
Obviously its not just farmers who will be hit with this massive tax. Farming is what I know, but there are many small business owners that would be unable to pass their businesses on to the next generation. I suppose wanting to keep what my parents and grandparents have worked so hard for, might seem selfish to some. I’m guessing the politicians pushing this would call me privileged, but what kind of tax bill do they want to leave for their children? This country was built on working hard and improving life for the next generation. Where will it go if we can’t pass on what we work for?
Please share, and let your elected officials know you oppose the removal of the stepped-up basis, and the taxing of unrealized appreciation.
March 22, 2021|Business
Please follow the link for Transitioning your Business
If you are starting a new business, then you simply name your business as a private family business. Do not contract at all with the State of State. When you do, they become a third party contractor in your business.
Do a Certificate of Assumed Name and put the business name in that document, record it on the Land Recording Office.
You will need a Common Law Agreement for work that you are doing with your private customer. They are very simple. I will perform this work (description) for $XX per hour or per piece. My hours will be, my completion will be.... or however best describes what is to be done. Outline roles and responsibilities. Either party has the right to end the agreement if there is not honor.
Banking is problematic because they just don't have what we need.
But you can open an account in a credit union (stay away from Central Banks) as a non-interest bearing account.
Autograph your application with your by: First Middle Last ©, All Rights Reserved, Without Prejudice
You can add " Redeem all money as lawful money per 12 USC 411" on the application.
You will also need to send a letter to the Credit Union Bank President asking to do the same.
You can ask them to put this in your client file: https://www.law.cornell.edu/uscode/text/12/411.
It they have signature cards, be sure to use your by: First Middle Last ©, All Rights Reserved, Without Prejudice