CNN Money Quotes Beth Kaufman on Repeal of Estate Tax
Republicans calling for the repeal of the federal estate tax often claim it makes it hard for American farmers and ranchers to pass on the family business to the next generation.
But most U.S. family farms are unaffected by the federal estate tax.
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In 2016, only 682 taxable estates -- or just 13% of all taxable estates -- reported having any farm assets at all, said Beth Shapiro Kaufman, an estate tax lawyer at Caplin & Drysdale and former associate tax legislative counsel at the Treasury Department.
And those farm assets represented just a small percent of the gross estate values on average. That suggests that for many in this select group, the farm was not the sole -- and maybe not even the primary -- source of income. It also suggests that there may be other assets to tap if needed to pay an estate tax bill.
For example, Kaufman noted, farm assets represented just 5.4% of total assets on average in taxable estates worth between $5 million and $10 million. That drops to 3.6% for estates worth between $10 million and $20 million, to just under 2% for those worth between $20 million and $50 million, and to 1.5% of estates valued at more than $50 million.
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For instance, Kaufman noted, there's a "special use" valuation that may be used to lower the value of farm land for estate tax purposes. In 2017, the provision lets an estate take up to $1.12 million off the fair market value of a farm property if the market value is higher based on the potential use for the land -- e.g., how much it could fetch for retail or residential development.
In cases where estate tax is owed, normally it's due within 9 months from the date of death. But family members who inherit a farm and plan to continue running it are allowed to take 15 years to pay it off if the farm assets make up 35% or more of an estate's value. What's more, the heirs may choose to only pay interest on the tax due in the first four years, Kaufman said.
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Excerpt taken from the article “No, The Estate Tax Isn't Killing Family Farms” by Jeanne Sahadi for CNN Money.