Those per-acre numbers come from the average value of farmland in the annual Iowa State University surveys for 2000 and 2020.
If the farmer passes away, that 1,500 acres would more than likely pass to an heir without a federal estate tax, falling just under the current $11.7 million exemption (recognizing other factors and assets would also come into play).
Under the Democratic capital-gains proposal, $1 million in land value would be exempted. Then $10,338,500 would subtract the basis land cost $2,785,500, leading to $7,553,000 in gain. That $7.5 million would subject to the 20% capital gains taxes – leading to potentially $1.5 million in tax liability.
That’s a simple example, not taking into account any other circumstance, or asset. Still, the proposal by Van Hollen and others would lead to a significant shift in the taxing of estates, and how farmland is sold.
The bill would maintain current personal exclusions for homes — $250,000 for an individual, $500,000 for a married couple.
The Wall Street Journal noted the Biden administration “is weighing eliminating the current rules for stepped-up basis in the coming legislative push on infrastructure, education and child care.” The president could unveil his proposal for infrastructure, and how to pay for it, as soon as Wednesday.
There then remains the significant question of getting such a change in capital gains and stepped-up basis through a 50-50 Senate. Nearly every member of the Republican caucus signed on to the bill early in March to eliminate the estate tax.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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