Gift value for illiquid asset

On 20-Sep-17 4:47 PM, JoeTaxpayer wrote: ...

That's the problem; there is no such "standard"; the courts have ruled every situation must be evaluated on its own merits. There are some general accountancy rules that are recognized but there is no magic one percentage number you can apply universally. Just one recent overview article you might find of interest...

Don't overlook the P.6166 deferment rule, either, though...

We're fortunate to be where ground prices haven't reach such astronomical levels as farther east; can't imagine what we'd do if were in prime IL country instead of far SW KS...but it'd be ugly.

The IRS used to allow substantial discounts for this kind of thing in the past, but as I recall, they have been less cooperative more recently. If you want to claim a discount, you have to show it with expert testimony and hard numbers.

In theory it can be. But the devil is in the details. Because every year the value of the property increases, so you have to evaluate the situation every year. I have more or less frozen the value of property by having the kids buy it from the parents, with the parents forgiving mortgage payments. But it's not a simple process that's easy to calculate all at one time.

Thank you both. Especially for the articles cited here. They at least confirm some of my assumptions.

On 21-Sep-17 6:35 AM, JoeTaxpayer wrote: ...

Not that it affects anything (yet), but I heard Sen Grassley (IA) on AgriTalk with Mike Adams yesterday morning. One of the subjects was including repeal of estate tax in the reform package--according to Sen Grassley, it's still in the mix. We can only hope. Writing to you congress-critters in support would not be bad, with examples of disasters that have or are likely to occur if you have any can share.

It is my understanding that it is a myth that the estate tax forces people to break up family farms. There are farms that are broken up after the owners die, but it's usually because the heirs don't want to farm, or have other disagreements. It also seems to me that if you have an asset worth over $10M and don't do estate planning, you kind of deserve what happens.

I would be interested in documented stories of people who did reasonable estate planning but had to sell to pay the estate tax.

R's, John

Even for large estates, the tax code makes it easier for family farms in particular, as well as other family businesses. First, for family farms the code allows the land to be valued at how it is currently being used, rather than its "highest and best use." That is to say that if a farm might be worth a lot more if sold for development, it is taxed as the lower value as if it were sold as and to be continued to be used as a farm.

Additionally, for any family business that is worth 35% or more of the decedent's estate, the estate tax can be paid over a period of up to 14 years, with interest of 2%.

The article the GOP was promoting was

More than this, I've read that only 50 of 5000 estates subject to the estate tax are either farm or small business. This is all smoke and mirrors by the GOP.

The article author hasn't returned my email. I asked if she had any idea what the value of this ranch is. I bet she does, and it's not likely to pay a dime in estate tax, all a GOP propaganda article.

How would the estate be treated under the old tax laws? I suspect a lot of the tales you think are myths came from pre-1980s farm estates. A lot of land around here, which used to be farms when I was a kid, are now asphalt with a building (manufacturing or store). I don't know how that land was evaluated (farm-use or highest and best use) when the owners died.

/BAH

Before the 1980's (I think the law changed in 1978) the lifetime exemption was $600,000, and there was no portability. I think farms were valued at their highest and best use, so if they could be worth a lot more if used for development, they were valued higher so the tax could be a lot more. I'm not positive, but I think the low interest and deferred payments also came in about that time.