<p>Well, FF, all I can say is that considering that the estate tax is well under 50% of the net asset value under all family farm inheritance situations I don’t see how that can cause heirs to be “forced to lose the farm.” If you can explain how that happened, instead of simply asserting that it did, I’d be all ears. I suspect that there were factors involved that have been left out of the scenario you recited - whether you know it or not.</p>
<p>OK, let’s use your numbers. Let’s say that the taxable value for estate tax purposes was $4M and that the tax was 40% of that. That would mean the the farmers would have to come up with something like $1,600,000. You say they could take out a loan, which when this happened would probably be about 9%. Not having a calculator handy that comes to roughly $160K per year. Do you realize the amount of cabbage that this farm would have to produce to just pay the loan off? I’m sure that this is significantly more than what the farm grosses each year.</p>
<p>how many family farms, FAMILY farms are worth 4million…where are the stats, exclduing the mega farms, some family run, that ups the averages…</p>
<p>4million is an awfully high # for a small farm…so why pick it</p>
<p>kluge, it’s really not that hard to understand if you try. The land is valued by what it can produce at ag value of $200 an acre. That’s based on the value of what it can produce. (Don’t laugh. That is the appraised ag value on my land.) The government values the land for estate tax at $4000 an acre market value as speculative development land (again, that is what is on my appraisal under market value). </p>
<p>While admittedly Rancher Jones might can ( theoretically if he has excellent credit but without proven income it’ll be dang tough, and he won’t have the income from the ranch) borrow the money to pay the estate taxes of 40% let’s say , he’ll never be able to pay it off by ranching. Never. Not in a 100 years at 2%. Even with good rain (which we haven’t had in seven years). Even without equipment and facility needs. </p>
<p>Voila - more land is taken out of agricultural production. Not good for the environment, not good for wildlife, not good for ranchers and farmers, and ultimately a threat to our way of life. </p>
<p>That’s what happens. Tell your searchers to look for that scenario - it happens every day. Look up the figures of land taken out of production. In some places, it makes the destruction of the rain forest look like it’s in slow motion. </p>
<p>As an experiment do this. Search your area for ranchland at market price. Then build a business model that works setting up a cow calf operation. Try it. It doesn’t work. The only way it will ever work is an estate tax exemption. No individual is going into farming or ranching buying land at market value and then paying for that land with the proceeds of that traditional ranch or farm. It can’t be done.</p>
<p>The ranchers around me have been here for an average of two generations. I don’t want it to be their last. They don’t view the land like you and the government do. It’s not a commodity. They didn’t ask for that sky-high city value. They just want to do what they have done for generations. Feed us.</p>
<p>Curmudgeon, I agree that it happens every day - just not that it happens due to estate tax. If you have farmland in a developing area, so that it’s worth far more as developable land than as farmland, there’s a big incentive to sell to developers. It’s not uncommon that it happens after Mom and Dad die, because someties Mom and Dad are happy with things as they are, and don’t care to sell out for the big bucks. Son and Daughter often feel differently. Your argument applies with equal force to slum tenements as it does to farms - are you equally determined to “preserve” them, too? The taxable value of the property for estate tax purposes is supposed to be its current fair market value - that is, what you can sell it for today. As to the environmental protection aspect, that’s a subject for discussion - but not in the context of estate tax. You want to make it farmland in perpetuity? Fine -doing so will lower its value, because eliminating its development potential limits the income it can produce, hence it’s value, and hence your estate taxes. Somehow I don’t think that’ll be a big seller in FF’s part of the world, though. Are you suggesting that all farms currently in operation were inherited, and that’s it’s impossible to go into that business buy buying farmland and farming it? Because that’s not an accurate statement, except as to “fringe” land, in the path of development. And enough farmers are hapy to sell out at a big profit there to keep the ball rolling, tax or not.</p>
<p>So, Fundingfather - you’re telling me that the poor farmer-victims pocketed $2.4 million bucks when teheir parents died, because the property they inherited was worth far more than its economic value as a farm? So basically it was a “hobby farm”, with it’s primary economic role being to provide a feel-good experience for the owners and neighbors? That’s still not your tearjerker scenario of poor Farmer Brown’s kids being forced from their home by economic necessity. What happened was that their land didn’t make economic sense as a farm anymore, unless it was subsidized by the government as such (as apparently happened.)</p>
<p>crum,</p>
<p>Again there are many ways to reduce the obligation. The IRS has given many people a way. If someone chooses not to use the legal methods spelled out to minimize the tax. Should we feel sorry for them for choosing to do nothing? </p>
<p>It is misleading for those who want to do away with the estate tax to claim a first dollar tax liability when there isn’t. If you aren’t sure about this tax or what to do, talk to an estate planner or your accountant.</p>
<p>
have you ever filled out a schedule F for yourself kluge? I’m sorry but you have no idea what you are talking about. And yes, in my area of the world it is impossible to pay market and then make your nut off the land. And that extends a hundred miles away from any metro area. Path of developers my eye. It is accurate.</p>
<p>Look up Gorman, Texas. Find it on a map. See what you think the developers are drooling over. That land is being valued today for $2300 a acre. Ten years ago it was $1000, 40 years ago it was $60. If people ignorant of the realities of ranching have their way, better start liking “foreign” food. One more thing sent overseas.</p>
<p>Opie, it’s curm, or curmudgeon. Not crum. And don’t lecture me on trust and estates. My degree just might be bigger than your degree and my partner’s degree is even bigger. 
But this ain’t a contest. At least to me it’s not. </p>
<p>Get out in the real world and see how tough it is to hold onto a family ranch or farm. Most ranchers are pretty independent folks. They don’t cotton to giving up ANY control before they are dead. Nor do they like to be forced to make way down the road decisions with right now facts. </p>
<p>In our world of blended families, divorces, community property, and kids that are “yours, mine, and ours”, many of the vehicles available are “clunky” at best. Until you live it, don’t suppose you know what it is like.</p>
<p>Talk about Freudian slips…</p>
<p>Aaah, allmusic, it’s happened before. Nothing novel about it after a couple of times.</p>
<p>
You clearly don’t know what you are talking about. Suppose you owned a farm in Palo Alto. How big would it have to be to be worth $4M. If anything the farm was worth considerably more than that and hence the taxes due were far more.</p>
<p>Yes, the people who owned it were worth a lot of money on paper, but what was important to them was that they wanted to farm and as a result of the estate tax, they would have been forced to give up farming it to pay the estate taxes. Thankfully the town (lead by a Democratic mayor, BTW) came up with a creative way for the family to stay on the farm and for me to buy my flower seedlings.</p>
<p>It’s good to be on the same side as crum (er I ,mean curm) for a change.</p>
<p>I’m thinking it’s kind of nice, too ff. But just don’t get too used to it. And hey - driver and I are going to be Ultimate Frisbee buddies. She’s teaching me about the game. A little cc hands across the aisle.</p>
<p>This discussion highlights the gulf between rural and urban Americans. I’m a city girl – actually, a suburban girl who likes to go into the city for entertainment.</p>
<p>My FIL grew up on a small farm in east Texas. He’s lived all over the world, but he’ll always be a country boy. Ranchers and farmers are just different – in a good way, I might add. To me, they are the original conservationists. The farm people I knew in Minnesota would do anything to help someone. So the tax issues of owning a ranch or farm are one thing. The cultural losses as we lose family owned farms and ranches is terrible, and I think one day we’ll wake up and realize that we’ve lost an entire way of life and value system.</p>
<p>I do agree sjmom, what happens is that industrailized dairy operations supplant family dairies. Feedlots proliferate over cow/calf operations. CAFO’s with their resultant watershed problems. You have to concentrate your herd. More poop. No place for the poop to go except to the rivers.</p>
<p>Nitrates create more algae growth. Algae growth ruins the community water reservoir. The large town nearest me is fighting this battle as we speak. You can’t believe what the water smells like. When the dairies were on hundreds (and sometimes a few thousand) of acres, no problem - but the dairyman can’t hold that much land anymore, and certainly not if the estate tax is back on them. The good guys are still trying but they have a heckuva time competing with well-financed (in some cases foreign government aided) agribusiness. </p>
<p>These industrial farms are largely owned by foreigners (around here) and they are not very attractive . In any way. (The Dutch own a heckuva lot of America. Look it up.) </p>
<p>If we can’t control our own food supply and we have no manufacturing jobs left at home, what exactly is our future?</p>
<p>Some communities are fighting back but an estate tax on ranches/dairies/farms will kill the last of them. Admittedly, their business model (small acreage , large number of animal units) is more cost efficient and productive/acre . </p>
<p>Is that the only determination a society should make when it comes to our food supply and our environment?</p>
<p>I think we can make other choices.</p>
<p>Why it is fun being Republican…maybe now we can all really find out:</p>
<p>The Democratic congressman who will investigate the Bush administration’s running of the government says there are so many areas of possible wrongdoing, his biggest problem will be deciding which ones to pursue. …
“There’s the response to Hurricane Katrina, government contracting in Iraq and on homeland security, political interference in regulatory decisions by the Environmental Protection Agency and the Food and Drug Administration, and allegations of war profiteering”, Rep. Henry Waxman D-Calif., told the Los Angeles Chamber of Commerce.</p>
<p>“I’m going to have an interesting time because the Government Reform Committee has jurisdiction over everything,” Waxman said Friday, three days after his party’s capture of Congress put him in line to chair the panel. “The most difficult thing will be to pick and choose.”</p>
<p>Curm and ff:</p>
<p>How about this scenario?<br>
- Set a threshhold for imposing estate tax that is high enough to protect the family farm (threshhold to be revisited at periodic intervals to take into account inflation)? This was proposed by Bill Gates Sr.
- Since it is difficult to figure out original value of some holdings, why not set the original date of assessment as being the time when the estate tax is enacted? Some will benefit from it, but it will avoid the issue of missing documents, figuring out the value of properties acquired or inherited, and so forth?</p>
<p>"Opie, it’s curm, or curmudgeon. Not crum. And don’t lecture me on trust and estates. My degree just might be bigger than your degree and my partner’s degree is even bigger. But this ain’t a contest. At least to me it’s not. "</p>
<p>I am sorry about the typo, it was an honest mistake. </p>
<p>As far as degrees go…well good for you, with all that intelligence then you SHOULD know exactly how to work within the system legally to avoid the problems you cite. With my tiny weeny degree and working knowledge being overshadowed by your deep knowledge of the subject, I would think you explain how to avoid such a unbarable tax situation, not complain of lost hope. I questioned your cry of hopelessness and you hit me with with your strength of education and your partners…OK you’re smarter than me, fine. That must make it sting all the more to point out the errors in your statement. </p>
<p>“Get out in the real world and see how tough it is to hold onto a family ranch or farm. Most ranchers are pretty independent folks. They don’t cotton to giving up ANY control before they are dead. Nor do they like to be forced to make way down the road decisions with right now facts.”</p>
<p>Gee, I live where you can smell the cow poo too! I’m not debating how hard it is to hold onto a farm or ranch, I know this in my family too. You think there’s no other farming or ranching done other than in Texas. I guess none that matters right? :)</p>
<p>“don’t cotton to giving up ANY control before they are dead.”</p>
<p>Well isn’t their problem then? Not the law’s? That is certainly a choice anyone can make and it costs x amount of dollars to choose that one. Sorta like choosing one crop over another isn’t it? And honestly who are you giving up control to? your wife, your kids? your grandkids? your church? All for the most part would take place at death anyway. Control is also another word for stupidly stubborn when faced with the costs and choices infront of someone. </p>
<p>“Nor do they like to be forced to make way down the road decisions with right now facts.”</p>
<p>Well too bad, as a rancher do you decide each day how many head your gonna butcher or raise or do you go by feel? As a farmer do you go to the store the day before you plant and decide what seeds to buy or do you base it on last night’s dinner vetegable? Do you wait until your irrgation canal falls apart or do you plan on taking care of it? </p>
<p>Everyday a farmer/rancher has to think ahead about tomorrow and the days after. The good fairy didn’t drop down and tap them on the head with a wand and "poof " they have a farm. They had to plan didn’t they? Maybe not in Texas I guess. You show me a rancher or farmer who just lets stuff “happen” on the farm/ranch and you’ll have the luckiest farmer/rancher on earth. </p>
<p>Besides, outside of killin yourself, what day are you gonna die? You or they may not like thinking of joining the lord or allah or coming back as a cow, but nobody, even those good folks from Texas, have figured out how to beat dying. </p>
<p>Planning ahead actually means you do have control over things, suggesting what you are is just the opposite. You’re leaving it to the courts, I’m advocating putting down on paper what you want to happen. You certainly have the right to do nothing, the law allows for that too. Doing nothing is far more profitable for the government anyway. Maybe you’re just being a good American by not having a plan.</p>
<p>I’d rather be dumb with little ol degree than be as smart as you and your big degree. Cause at the end of the life, I know the where, what and how my money is going to be distributed, with a big chunk not even on the tax table. And my wishes will be carried out fairly quickly, especially compared to someone who did nothing. </p>
<p>“In our world of blended families, divorces, community property, and kids that are “yours, mine, and ours”, many of the vehicles available are “clunky” at best. Until you live it, don’t suppose you know what it is like.”</p>
<p>Sorry Curm, I’m not a child, I have enough assets that I did my paperwork more than a decade ago, closer to two decades actually. I live in a community property state and everything I suggested works very well there. thanks. </p>
<p>And I am sorry about the mispelling, it was not intentional.</p>
<p>Opie,</p>
<p>So if all it takes to beat the estate tax is good planning, why advocate for it? Certainly the smart rich people can hire all kinds of fancy estate planning lawyers and avoid it if little 'ol you can do it. Sounds to me like what you are saying is that only value of the estate tax is to snare the dumb rich people like the farming family that I am talking about. Not a very noble tax if you ask me.</p>
<p>“So if all it takes to beat the estate tax is good planning, why advocate for it?”</p>
<p>Good planning minimizes estate taxes just as contributing to your 401(k) reduces your current tax liability. Or having a christmas tree farm on the gentleman’s farm. Things have been set up for those who plan. The estate tax is no better or worse than any other tax. It’s part of the price of living in a free country. I have not been cheerleading it’s merits as others have done that, I’ve simply and honestly said there are ways to reduce and minimize the impact of the tax. </p>
<p>“Certainly the smart rich people can hire all kinds of fancy estate planning lawyers and avoid it if little 'ol you can do it.”</p>
<p>Mine cost around $250 back when I did it and it will shelter several million of assets, provide for the care of my children and distribution of my estate. It doesn’t cost that much relative to the size of the estate. </p>
<p>Now Warren Buffet or Bill Gates it’s gonna cost more, but hey, they have a little more scratch than me. And as you have guessed I’m neither smart nor rich and the lawyer I used was pretty basic as well. </p>
<p>“Sounds to me like what you are saying is that only value of the estate tax is to snare the dumb rich people like the farming family that I am talking about.”</p>
<p>No, not at all. I did not place a value or worth of the tax or any tax. I did however suggest ways to reduce it. If that makes me a bad guy oh well. </p>
<p>“Not a very noble tax if you ask me.”</p>
<p>Can you name a noble tax? I’ve never looked at it that way. I have always figured taxes were the price I paid to be part of a society that is free. I have no say if my tax dollars are used for education or bombs, I just have a say in who makes those decisions of how that money is spent. </p>
<p>I am sorry these people you know were stuck by their father’s inaction. But how do you know he wasn’t aware? The good fairy didn’t come down and tap me on the head and “poof” I was given all the knowledge about estate taxes. </p>
<p>Curm did have it right that some people don’t want to give up control or think that far ahead. I ask is it fair for them to that? Is it fair to their spouses and kids? </p>
<p>I have sat with men who want nothing more than to make their wives and children feel nothing but pain at their demise. Sort of a final get even. I find it sick and reprehensible behavor, but it is not against the law and honestly is another estate planning option. Some people hate their families so much the thought of them falling apart after their death arouses them. </p>
<p>I guess I could ask you the same question turned 180 degrees from the tax to the dad of the family. </p>
<p>“Not a very noble man if you ask me.”</p>
<p>Why didn’t he plan, didn’t he care? didn’t he love his children? </p>
<p>I didn’t come at you this way. I do feel for the situation, but it is not impossible to work these things out. It’s not as expensive as you might think relative to the size of the estate and there are several means to achieve your goals.</p>
<p>Curmudgeon, everything you say makes a good argument for protecting farms and farmland as a basic principle. It’s more complicated than we have room for here, but there’s certainly a concept there worth examining.</p>
<p>But eliminating estate tax as a method? That isn’t just roundabout - it’s positively bizarre. Hey - why not just give farmers cash each year? (I know we sort of do that already - but more.) Estate tax for the most part doesn’t affect family farms at all. When it does, it’s a minor effect. As the study I referenced found, in every case if Mom & Dad had any life insurance at all - the farm was ready to be inherited free and clear. But Paris Hilton isn’t a farmer, any more than the majority of other people affected by the estate tax. And the bald fact is that in farm country USA nobody could find a single farm “lost” due to estate tax. Many heirs choose to sell out, because it is economically rational for them to do that. If Dad doesn’t like that, well - tough. Dad’s dead. He should learn to let go and let the kids choose for themselves.</p>
<p>“Save the family farm” is a bogus stalking horse for just more of the same old income redistribution upwards. Shifting the tax burden further away from wealthy heirs to teachers and firemen and other wage earners isn’t the answer. But cutting tax on wealthy heirs requires wage earners to pick up the slack. No free lunches here.</p>