Ohio Farm Bureau introduces Energy and Utility Issues Resource Guide
Ohio Farm Bureau’s newest resource for members seeks to help farmland owners navigate the many questions surrounding energy development.
Read Moreby Ryan Conklin, Wright & Moore Law Co., LPA
If you have been following the news on Capitol Hill in recent weeks, you may have heard about proposed tax code changes. The STEP Act outlines several major revisions to gifting rules, capital gains, and stepped-up tax basis. Given the proposed changes to tax basis rules, I think it’s a good time to talk about some basics of tax basis.
According to the IRS, tax basis refers to “the amount of your capital investment in property for tax purposes.” This capital investment can be what you paid in cash, assumed in debt commitments, or exchanged for other property or services. Basis can be modified through events like adding improvements to real estate, inheritance, or through depreciation.
Pretend you purchase a 100-acre farm in 2000 for $1,000 per acre. Your tax basis would be the $1,000 per acre purchase price. Fast forward 20 years, and your heirs inherit the property after your death. After you pass away, the farm appraises at $10,000 per acre. This new appraisal value constitutes the new tax basis because the heirs receive a “stepped-up” basis after your death.
A similar outcome is achieved with farm equipment. If you buy a tractor for $100,000, the purchase represents the basis. From there, if you use applicable tax rules to depreciate the purchase, the new basis is the depreciated amount. At death, the tractor is reappraised, a new basis is established, and the tractor can be re-depreciated by the new owner.
The elimination of stepped-up basis could be catastrophic for family businesses. It could result in new taxable events stemming from gifts, moving assets into trusts or LLCs, sales of depreciated assets, or through inheritance. The capital-intensive and debt-reliant nature of agriculture means many farms could struggle with these tax bills. To cap it off, stepped-up basis could be hard to come by under this new statutory scheme.
Please keep in mind that the STEP Act is only a bill, and must clear tight margins and intense scrutiny in both houses of Congress. American Farm Bureau distributed an action alert in early April asking members to lobby their representatives to oppose this bill. I would urge readers to join in this effort, as the loss of certain tax basis provisions could jeopardize farm survivability nationwide.
Consult your tax professional for more information to help your family or business.
Wright & Moore Law Co., LPA has a rich heritage in Ohio agriculture. Since 1988, our firm has proudly assisted farmers, rural residents, and landowners from all over the state with their farm succession planning and agricultural legal needs. We would be happy to discuss your family goals and how to meet them. To learn more about Wright & Moore or schedule a meeting, call 740-990-0750 or visit OhioFarmLaw.com.
Ohio Farm Bureau’s newest resource for members seeks to help farmland owners navigate the many questions surrounding energy development.
Read MoreFarm Credit Mid-America has committed $250,000 over the next five years to support the grant and help it achieve its vision.
Read MoreFourteen farmers and agribusiness professionals from around Ohio recently graduated from Ohio Farm Bureau’s AgriPOWER Institute Class XIV.
Read MoreWith this action, the agricultural organizations are rising to the defense of Ohio farmers, who have long been a legal target of the ELPC, an anti-agriculture activist group.
Read MoreShelby Rhodes of Augusta has been named operations coordinator for Ohio Farm Bureau.
Read MoreOhio Farm Bureau Young Ag Professionals and AgriPOWER Class XIV embraced the fast-paced culture of our nation’s capital for an extensive leadership experience Sept. 10-12.
Read MoreThe committee collects and organizes public policy recommendations from county Farm Bureaus and presents the final policy suggestions to be voted on by delegates during the state annual meeting.
Read MoreIf you’re interested in exploring manure digesters for your farm, talk to an Ohio State University Extension specialist familiar with the systems.
Read MoreOhio Farm Bureau is featuring innovative agricultural technology solutions and cutting-edge research at this year’s Farm Science Review Sept. 17-19.
Read MoreThe 14th annual Cultivating a Cure, an event created to support cancer treatment and prevention research, welcomed nearly 350 attendees and raised an event record-breaking $156,485.
Read More