Estate taxes tend to be more onerous for farms than other small businesses because 80 percent of farm and ranch assets are land-based, says John Hart, director of news services for the American Farm Bureau Federation. When estate taxes exceed cash and other liquid assets on hand, surviving family members may be forced to sell land, buildings or equipment needed to keep the business operating. This has a multiplier effect because rural communities and the businesses they support also suffer when farms and ranches downsize or disappear, he adds.

On Jan. 1, the estate tax expired for one year and one year only. On Jan. 1, 2011, unless Congress acts, the estate tax will return with a vengeance and will carry an exceedingly low $1 million exemption; anything above $1 million will be taxed at 55 percent. This will harm most family farming and ranching operations. There’s a joke going around that if you want to avoid the “death tax,” you better get your dying done before midnight on Dec. 31, Hart says.

He adds that the talk on Capitol Hill is that the Senate will take action on estate tax reform early this year. Before going home for the Christmas recess, the House passed a permanent extension of the estate tax at 2009 rates, which carries a $3.5 million exemption for individuals and $7 million for couples, while taxing the rest of the value of the estate at 45 percent. But the Senate, bogged down by the health care bill, failed to take any action on estate tax legislation as it wrapped up its business in 2009.

Farm Bureau backs permanent repeal of federal estate taxes. Until permanent repeal is achieved, Farm Bureau calls for an exemption of $10 million per person, indexed for inflation. The $10 million exemption may sound high, but it really isn’t when you factor in land costs and other variables, particularly for farms in areas where land values are high.

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Source: American Farm Bureau Federation