Tax Planning

Farmers pay a variety of taxes, including income taxes, self-employment taxes, estate and gift taxes, property taxes, sales taxes, and excise taxes.  Farm transfers planning impacts income taxes, self-employment taxes, and estate and gift taxes more than the others.

Estate and Gift Tax

Under current law, few farmers have enough wealth to be subject to the federal estate tax on the transfer of assets at death or to gift taxes on the transfer of wealth during their lifetime.  However, because estate and gift tax rules could change, the estate and gift tax consequences of transferring farm assets should be considered as farmers plan their exit from farming and transfer of wealth to the next generation.

Income Tax

A sale of assets causes the seller to recognize gain or loss of both federal and state income tax purposes.  Giving away assets during lifetime or transferring them at death has an income tax effect on the recipient because of the differing effects on the recipient’s income tax basis. AgVentures Chapter 3:Tax Considerations of Farm Transfers PDF Business Arrangements and Farm Transfers This chapter explains the income, self-employment, gift, and estate tax consequences of various methods of transferring farm assets, including sale, gift, and transfer at death.  It includes a discussion of installment sales, trading farm assets for other investments and transferring to business entities.  The tax rules are illustrated with examples.  A tax implications exercise is included.

Additional Resources

AgVentures Chapter 3:Tax Considerations of Farm Transfers PDF Business Arrangements and Farm Transfers This chapter explains the income, self-employment, gift, and estate tax consequences of various methods of transferring farm assets, including sale, gift, and transfer at death.  It includes a discussion of installment sales, trading farm assets for other investments and transferring to business entities.  The tax rules are illustrated with examples.  A tax implications exercise is included.