Inheritance tax is a concern for agricultural businesses, organizations


Wiliiam Barton Fuller and Rebecca Fuller and their children, circa 1895. They are the first generation to own family land today operated by the royal family in Verdi. BETTY RACKLEY | COURTESY PHOTO

There is a bill waiting to be passed in Congress that worries some family farms and ranches and the organizations that represent them. If passed, the new law will amend a tax shelter that protects certain beneficiaries who inherit property.

Agriculture is an industry that is absolutely vital to our economy and our survival, which is why there are tax shelters to protect our country’s farmers and ranchers from the financial burden that would be placed on them if they had to pay taxes. high on capital gains on family land that is passed on.

Unfortunately, there are those who will look for loopholes to take advantage of a tax shelter to benefit from illegitimate, even fraudulent exemptions. The government is charged with finding ways to protect its citizens for whom these exemptions were created, while preventing people from dishonestly benefiting from them.

While it is understandable that our government wants to pass legislation to prevent this, there could be unintended consequences for farmers and ranchers.

Right now they’re protected under an increase in base provision. Without this provision, even farmers who inherit land that has been in the family for generations could have to pay a capital gains tax based on the value of the property at the time of inheritance.

“The base mark-up provision adjusts the value, or ‘cost base’, of an inherited asset (stocks, bonds, real estate, etc.) when it is passed on, after death. This often reduces the capital gains tax owed by the recipient, ”according to the Tax Foundation, an independent nonprofit with 501 (c) (3) tax policy.

“The base price receives an ‘increase’ from its fair market value, or the price at which the good would be sold or bought in a fair market. This eliminates the capital gain that occurred between the initial purchase of the asset and the acquisition of the heir, reducing the tax liability of the heir. Visit for more information.

While some of the wording in the bill continues to protect businesses related to agriculture, some organizations continue to have concerns if this bill passes as written. The Texas Farm Bureau, for example, has called for action to get people to voice their concerns to Congress. Their website urges, “We have reached a tipping point in the tax debate in Congress and it is extremely important that you contact your U.S. representative and senators to fight negative tax proposals.” To answer this call, or for more information, go to 88229 / Reply.

Our economy depends on farmers, ranchers

It is true that paying even a high tax on inherited land may not be a huge loss for those who do not intend to use the land for commercial agriculture or ranching. But for the many people who still depend on their land for income and food, and those who work in other professions, there can be a direct impact.

There is also the argument that this bill should not be of concern because it only affects “large” farms. There is the presumption that large farms should be able to pay this tax. But the reality is this: land that is inherited has value, but is received in a form other than money. The value of the property could increase the beneficiary’s adjusted gross income, which could increase the amount of taxes owed to the IRS – and those taxes must be paid as money. Those who do not have enough money to pay taxes must acquire the funds elsewhere.

For some, the only option would be to sell assets which could include the equipment used in the business, the livestock around which the business is centered, or even the land itself.

The obvious result could be the end of an already established and functioning business. This can not only affect the family, which can span multiple branches of the family tree, but could also affect the local economy and beyond – anyone who purchases products made on this land, either directly. or indirectly.

In a letter to Representatives Chuck Schumer, Nancy Pelosi, Mitch McConnell and Kevin McCarthy, dated September 7, 2021, the American Farm Bureau Federation said: Challenges in keeping food on the shelves during the COVID-19 pandemic. As the country and the economy begin to gain a foothold, we must not undermine the long-term risk management tools on which agriculture depends or increase taxes at the expense of the farmers and ranchers who cultivate the food supply. safe and sustainable that we all depend on. “

The full letter is available on files / AFBF_ Reconciliation_ Letter_ to_ Congress.pdf.

The legacy of a family of local farmers

Besides the economic impact on individuals, families, businesses and communities, there is another question. What is the value of the years of history, culture, heritage and family tradition intertwined with the deed of this land?

Verdi’s royal family, for example, owns family land that dates back four generations. As early as the 1800s, William Barton Fuller bought, sold and traded land. Through multiple inheritances, the family acquired property from both sides of the family.

Betty (Royal) Rackley remembers the stories that have been passed down in her family over the years. One of them is located in a part of the property that the family calls Fuller Place. They hired young men to work on their farm, and on many occasions Rackley’s great-grandmother, Rebecca, gathered the young men on the porch for Bible studies.

One of those young men was Rackley’s grandfather, Frank Royal, who married Rebecca’s daughter, Lottie Fuller. Together they had Rackley’s father, Ned Royal, a name well known and respected by many in the Verdi and Pleasanton area today. Parts of this land are still managed by Rackley’s brother, Lee Royal and his son, Carl, where they produce livestock as well as peanuts, corn, peas and other produce.

Any changes made by this bill will come into effect in early 2022. There are ways to be proactive in protecting family lands and businesses related to agriculture.

In addition to contacting Congress and voicing concerns, those affected are urged to begin talking to a tax professional about options, things that can be done now, to protect their assets if this law is passed.

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