Farm subsidies (artificially cheap grains for feeding cattle) and the inheritance tax (children are forced to sell the land after parents die due to tax obligations)
The 2018 individual inheritance tax doesn't apply to inheritances below $5.6 million per individual ($11.2 million for couples)[1]. I suspect that relatively few small farmers are impacted by it.
There were 682 estates in 2016 that contained farm assets subject to the estate tax, and on average about 5% of taxable assets on such estates were farm assets, while about 80% of the assets of family farms are family farm assets.
That suggests that the number of family farmers caught by the estate tax each year can be counted on your hands. And even then, farmers (unlike everybody else) get 15 years to pay off the estate tax. So, yeah, politicians claiming to hate the estate tax because of its negative impact on small farms are lying their ass off.
I'm in this situation -- when my mom passes, me and my brothers will inherit the family farm of 320 acres in central VA. As far as I can tell there's no inheritance tax involved.
Just in case, decades ago my dad put the land in a family partnership of which me and my siblings each own 19%. So even if inheritance tax was a thing for family farms, there are ways around it.
We'll have to pay property tax on it, but that's around $3000 per year.
> Just in case, decades ago my dad put the land in a family partnership of which me and my siblings each own 19%.
Is it that easy to bypass the estate tax? I'm surprised it collects basically any money at all, if all you have to do is make your children "co-owners" before you die.
It absolutely was a thing in the 1970’s. I saw neighbor’s farms destroyed by the inheritance tax. The law was changed, so now the inheritance tax kicks in at a much higher level. Most farmers set up trusts now anyway.
It wasn’t only farmers that got clobbered by the inheritance tax. The children of the local shoe store owner were in the same inheritance tax hell.
Most ranches and farms are set up so that there isn't much value if you don't sell the whole thing.
You need land, the homestead (house, barn, shop, corals...), a water source (ideally multiple), roads in and out, fences carved the right way...
Yes, you could likely sell a portion of the property, but the parts aren't worth the same as the whole. You'd likely eat the cost of adding in new windmills, water storage tanks, and developing the land in order to get it to sell if you were to carve out a part of your existing pastures and put it on the market.
We basically ended up carving off the farm land and selling that, but we had to pay to put a road in... and fences on either side of the road, cattle guards, and it ended up costing $100k in materials and labor (since we had to hire people to do it given nobody lived out there any more)... all just to make $300k.
TL;DR: Ranches are set up to be units, and while you can sell part of the land, it sucks to do so.
Farm subsidies (artificially cheap grains for feeding cattle) and the inheritance tax (children are forced to sell the land after parents die due to tax obligations)