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Land taxes: Advice shared to protect the next generation of family farms

by Wyoming Livestock Roundup

Transferring land and assets is a big fear of many farmers and ranchers across the country. Generally, families want to keep the farm or ranch within the family. Knowing what to do when the time comes can save families thousands and thousands of dollars.  

“The American public, including most of the people in Congress have an incentive for farms and ranches to remain in the family,” shares Paul Neiffer, certified public accountant and business advisor.  

Neiffer joined the Beltway Beef podcast on July 15 to share his knowledge behind the transferring of assets on family operations.  

Current transfers 

Normally, family farms are transferred to new family members preceding death. The incident usually causes extra stress on the family.  

Neiffer says, “When a farm family is transitioning to the next generation, it is a very capital-intensive business.” 

He continues, “Any time there is extra taxes, which occurred on the transfer, it makes it difficult for the family to transfer the ranch to the next generation.” 

Right now, it is simple for families to transfer assets because the heirs can set up the program in basis.  

“For a ranch there is a lot of items that have a zero-cost basis,” Neifer explains. “When the person passes away, we get to step the asset up to the current worth. Then, the next generation gets to deduct this all over again.” 

The current transfer program has helped the next generation of family farm owners afford the farm.  

Another long-term provision benefiting new landowners today is their flexibility in the land they take over.  

“Farmers and ranchers have the ability to sell land and reinvest it into other land and have that be a tax deferred arraignment – they don’t owe this tax during lifetime,” Neiffer says.  

Now, if the next generation does not want to keep the land in the family name, they have a few different options to exchange the piece.   

Neiffer explains, “If it ever ends up the family sells or the family stops farming, then they are going to owe the tax and likely the tax is going to include interest.” 

Redefining family 

Recently, the Biden administration has put in place new laws which affect transferring land within family farms and ranches. Simply put, for single people and couples, the number of gains allowed on taxable income has changed.   

Digging deeper into the transferring of farms to the next generation, Neiffer explains, “A lot of farms right now are going to stay in the family, but they are not going to the kids. Instead, they are going to the nieces and nephews because they are the ones farming.” 

The issue lies in the fine print of the revision. Suggesting family only means spouse and kids, “keeping it in the family” holds a stricter definition. This provision causes an immediate tax because nieces and nephews are no longer in the family.  

“If it is truly an exemption, great, but our concern is the exemption is not going to be brought up,” shares Neiffer.  

While not fond of the 10-year requirement, the businessman is also worried the new language is going to negatively impact the next generation of family farms and ranches because of the confusing language.  

“The American Family Plan – the green book President Biden came out with – only has about two sentences to deal with the whole thing,” Neiffer explains. “It is really hard to get very excited about these so-called exemptions. If it is like a lot of these other exemptions, they are not going to be as good as they are taunting.” 

Expressing his concern toward the new program, Neiffer says, “There is already a revision in the code called 32A that deals with transfers of farms to the next generation. As part of this code, there is a 10-year requirement, and cousins, nieces and nephews don’t qualify.” 

Challenging new programs 

While Biden and his team may be posing a challenge to the family farmers and ranchers of America, there are two programs set into action which focused on new transfer methods.  

The 99.5 Percent Act was proposed by Sen. Bernie Sanders (I-VT) and aims at forms of trust to transfer assets. Expecting to drop exemptions down to $3.5 million, the act would lower the amount of money families are able to give away.  

Neiffer describes this new act, saying, “He would like to curtail the ability for farm families to transfer assets to the next generation in the form of trust. Right now, a farm family can transfer assets in the form of trust and there is no tax owed.” 

The second act also includes transferring land using trusts.  

“On the Step Act side, if landowners have transferred their land into a dynasty trust, it is going to be taxed every 25, 30 and 35 years,” explains Neiffer. 

However, this new act makes more work for the farm owners.  

Neiffer shares, “If the family farm is transferred into a trust for the benefit of the farm, every 25 years they are going to have to pretend they sold all of those assets for fair market value. If they have these dynasty trust set up, they have to pretend they are doing an estate every 30 to 40 years.” 

The details of these acts could be very detrimental to family farms and ranches.  

Acknowledging landowners’ concerns, Neiffer concludes, “Farming is a very low-margin business. Any time you have to assess extra estate in income taxes, it is very difficult for families to keep the farm or ranch in the family.” 

Savannah Peterson is an intern for the Wyoming Livestock Roundup. Send comments on this article to 

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