Transfer Tax Can Be Worse Than Estate Tax
Article By: Paul Neiffer, CliftonLarsonAllen
This morning I gave a 20-minute talk on President Biden's tax proposals for the Washington Potato and Onion Association in Leavenworth, Washington before driving to Seattle to catch a flight to Cedar Rapids, Iowa. Tomorrow, I will be part of the team for the Farm Futures Ag Boot Camp. I think this is about my 7th year of being part of this program.
As part of my talk this morning I gave an example of how farmland worth $30 million with a basis of $1 million since Grandpa purchased the property in 1960. At the time of his death, he had a mortgage on the land of $20 million and owned no other property. Since the lifetime exemption is $11.7 million, his heirs will not owe any estate tax. However, his final income tax return will report a gain of $29 million and the estate will owe about $14 million of combined federal and state income tax.
The result is instead of having an asset worth $10 million, the heirs are now upside down by $4 million.
Although this is an extreme example, many situations could be very similar to this. We will keep you posted.
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Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen (CLA) in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
This article was shared with permission from CLA's Agribusiness Blog, Farm CPA Today. For more information, contact Pat Sturz, principal at CliftonLarsonAllen's Eau Claire office, at 715.852.1120.
