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Author Topic: Farms not lost to estate tax, so why lie
danielinthewolvesden
The Red and the Green Stamps


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All quotes from the San Jose Mercury News, 4/6/01, "Data challenges image of farms lost to IRS". Pres Bush vowed a month ago: "To keep farms in the family, we are going to get rid of the death tax". Trouble is- farms are NOT being lost thru estate taxes.

Neil Hart, an Iowa StUniv economist who is well known for his tax advice to midwestern farmers, said "he had searched far & wide but had never learned of a farm lost because of estate taxes. 'It's a myth', he said".

"Even one of the leading advocates for repeal of estate taxes, the American Farm Bur. Fed, said it could not cite a single instance of a farm lost because of estate taxes."

I am a tax professional, with 16 yrs exp- and I have never heard of it either.

OK- there are some good reasons for estate tax REFORM, and there is wide bi-party support for this. But- why spread an UL about farms being lost? Why lie?


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rossdawg
The Red and the Green Stamps


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I did a study on this for graduate school using all kinds of sources (government, newspapers, census, banking industry, mortgage, farmers groups, lenders, IRS, lobbyists, and nutball independents) and found that 87%(and some years more) of all people and families who lost their farms did so outside of the 5 year window of the death of the main income raiser.
This means that 87 out of 100 American farmers who do foreclose or have to forcibly sell at a loss do not in a proximity of the death tax being charged. On farms (and most small businesses) 5 years is a long time.
And the numbers increase (up to 94% in some studies) if you can throw out anecdotal evidence such as a farmer who kills himself shortly before or after the foreclosure or sale of the farm. Also, family members who die together in a farm accident or fire and the next of kin (still part of the immediate family) who are either too young to pay the taxes, doesn't want the farm (after Dad dies) or can't afford the farm loans because Dad or Mom isn't there.
That stats aren't there to warrant it for farmers, Bush is doing this for his friends the millionaires, oil barons and industrialists.

ross "paid his taxes, now when will DuPont" dawg


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Pogue Ma-humbug
Happy Christmas (Malls are Open)


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quote:
Originally posted by danielinthewolvesden:
OK- there are some good reasons for estate tax REFORM, and there is wide bi-party support for this. But- why spread an UL about farms being lost? Why lie?

Simple. Without the myth of family farms and businesses being lost, the repeal of the estate tax would have little or no support. It affects less than 2 percent of the population. The first $600,000 is exempt anyway, and few people have estates that large.

In addition, people would realize how unfair it would be to allow some people to inherit millions of dollars tax free, while us normal folk have to pay taxes on every dime we make.

Actually, I'd like to see an even higher estate tax, as well as a general tax on wealth. Why should the wealthy be allowed to pay so little in taxes on millions of dollars of property?

Pogue "Eat the rich" Mahone

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Let's drink to the causes in your life:
Your family, your friends, the union, your wife.


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booda
The Red and the Green Stamps


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Someone tell this to my cousins in Connecticut. My aunt and uncle are alive and well, but around 80 and as soon as they kick the bucket, the 16-acre farm in Wilton, built by my grandfather and in the family for a century, will get sold. No way my cousins, even with the combined resources of all three of them, can afford to pay the federal, state and local taxes when it goes through probate.

But hey, maybe they're hallucinating. I mean how can an Iowa State University economist be wrong?


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dewey
Markdown, the Herald Angels Sing


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quote:
Originally posted by Pogue Mahone:
The first $600,000 is exempt anyway, and few people have estates that large.

In addition, people would realize how unfair it would be to allow some people to inherit millions of dollars tax free, while us normal folk have to pay taxes on every dime we make.

Pogue "Eat the rich" Mahone


$600,000.00 is chicken-feed when you are talking about a lifetime of savings. Any couple with a 401-k will amass savings that far exceed that. If they manage their money well in retirement they should have millions to leave their kids.

I am not talking about people from wealthy families who had everything given to them either. My wife and I are working stiffs from rather poor families. We have been contributing steadily to our 401-k's. We already have over $600,000.00 in our estate and we are many years from retirement. Having worked all our lives to save money instead of counting on the government to support us in our old age why should we give half of it to the government when we die?

Having said all that, I actually do not want to repeal the inheritance tax. I just wanted to show you that you are not just talking about the Rockefeller and the Kennedys being affected. You are talking about anybody who has made an effort to save for their future.

dewey


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Pogue Ma-humbug
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Just curious. How much is the farm worth? Did your aunt and uncle do any estate planning?

Why are they assuming the farm must be sold? Do any of your cousins want to continue as farmers?

Remember, the tax will be paid by those inheriting the estate, who just became richer by the value of a 16-acre farm. Why should they not pay taxes on that newfound wealth?

Pogue "just asking" Mahone

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Let's drink to the causes in your life:
Your family, your friends, the union, your wife.


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Pogue Ma-humbug
Happy Christmas (Malls are Open)


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quote:
Originally posted by dewey:
$600,000.00 is chicken-feed when you are talking about a lifetime of savings. Any couple with a 401-k will amass savings that far exceed that. If they manage their money well in retirement they should have millions to leave their kids. dewey


Sorry Dewey, but in what country is $600,000 "chicken feed"? I only wish I had near that amount -- or will have near that amount when I retire.

You'll find that few people have that much wealth -- even if you include homes, cars and other assets.

I think you've bought into the myth of the ever-increasing stock market and the stories about instant millionaires. In the real world, that just doesn't happen.

And depending on social security and a company pension plan is not "counting on the government to support us." It's getting back what we paid and support through years of working. That's why it's called "social" security.

One more thing, when you die, the government will not be taking half of you money. It will be taxing those who inherit the wealth, who would otherwise get a tax-free bonus. Is that fair?

Pogue "a fair tax system" Mahone

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Let's drink to the causes in your life:
Your family, your friends, the union, your wife.


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dewey
Markdown, the Herald Angels Sing


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quote:
Originally posted by Pogue Mahone:

I think you've bought into the myth of the ever-increasing stock market and the stories about instant millionaires. In the real world, that just doesn't happen.

And depending on social security and a company pension plan is not "counting on the government to support us." It's getting back what we paid and support through years of working. That's why it's called "social" security.

One more thing, when you die, the government will not be taking half of you money. It will be taxing those who inherit the wealth, who would otherwise get a tax-free bonus. Is that fair?

Pogue "a fair tax system" Mahone


Since when is it a myth that the stock market has been the best investment possible over a 40 year investment period. That's right, I said 40 years. I am not talking about instant millionaires. I don't believe in counting on hitting the lottery and I do not have faith that Social Security will be around when my children are old enough to collect. Social Security was designed as a pyramid scheme. Instead of investing contributions and paying contributors out of that pool the government foolishly hoped that the population would perpetually grow so that future contributors could pay for present collectors. I am not against Social Security, I just don't want to count on its existence after the money runs out.

Pogue, I don't know how old you are or whether you have been contributing to either a 401-k or an IRA, but if you haven't then I don't see why you should expect to use the money that I saved to make up your shortfall.

dew"quietly reached 500 posts"ey


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booda
The Red and the Green Stamps


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quote:
Originally posted by Pogue Mahone:
Just curious. How much is the farm worth?

Not sure, but according to one cousin the combined fed-state-local tax will likely be seven figures. (This is Wilton, Connecticut we're talking about.)

quote:
Did your aunt and uncle do any estate planning?

Yes. This mostly consisted of selling off bits of the property (which was originally forty or so acres) over the years. There's very little of the "farm" farm left...what acreage there is left is largely wooded, except for the frontage with the house, barn, the patch where my uncle grows flowers for the roadside stand, the beehives, a small orchard and vegetable patch. He's also rented out part of it to the county which uses it to store various agro stuff. The idea was just to reduce the crushing property taxes imposed by the state of Connecticut. Ironically, the tax situation forced the farm from being a large, productive dairy & other livestock type farm into being a relatively small unproductive one! Almost all of the money garnered from parcel sales and rental has gone to property taxes.

quote:
Why are they assuming the farm must be sold?

Er, lack of any other source of money for inheritance tax payment. See above.

quote:
Do any of your cousins want to continue as farmers?

Yes, at least one of them does. He lives a few miles away in Norwalk and is a member of the local Grange. He spends part time checking in on the place. We all show up there for harvest time. My cousins are an insurance shlub, a secretary and a copier repair guy.

quote:
Remember, the tax will be paid by those inheriting the estate, who just became richer by the value of a 16-acre farm. Why should they not pay taxes on that newfound wealth?

"Value". Heh. Funny word that. I keep trying to pay my taxes with "value" but the IRS insists on cash.

Unliquidated "value" and fifty cents may buy you a cup of coffee in some places.

Martin "Catch-22...it's the best catch there is" Booda


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Silas Sparkhammer
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quote:
Originally posted by booda:
"Value". Heh. Funny word that. I keep trying to pay my taxes with "value" but the IRS insists on cash.

I'm not in the position of saying thee nay, but... The IRS is generally willing to discuss term payments. If the farm is truly profitable, then banks would be willing to lend money for taxes... If the farm *isn't* profitable, then perhaps it is overvalued, and you could appeal. At worst, perhaps the farm could be divided: part sold off for the tax burden and the rest maintained.

My dad went through this with a farm that was tied up under a trust. He not only broke the trust, but (bless him!) went back and retroactively included the female line of inheritance (the original trust was divided only among the male heirs.) The courts were very sympathetic and accomodating.

The IRS really doesn't want to have to auction anyone's ranch. This isn't 1870.

I have to agree with the philosophical ideal that Pogue is defending: America isn't the sort of place where baronies exist and are passed via primogeniture. America is a place where everyone should, in theory, prove their own worth -- and have the opportunity to do so. If you merely inherit a bunch of money, how will you ever know what you're really made of?

For many years I have held this mantra: I would rather suffer from injustice than benefit from it.

Silas (and, wow, have I ever) Sparkhammer

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When on music's mighty pinion, souls of men to heaven rise,
Then both vanish earth's dominion, man is native to the skies.


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danielinthewolvesden
The Red and the Green Stamps


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booda- I sincerely doubt that your aunt & uncle will owe FEDERAL estate taxes. See, they will each be able to pass on some 2 million to their heirs- tax free (there are two other deductions/exclusions for farms & small businesses- worth 750K &675K). Also, they can pass 10K per each heir- per year, tax free.

But, if Fed estate taxes are still owed, then the IRS gives the Estate/heis a 5 years payment deferrral, then another 10 years to pay it off- all at a "big" 2% interest. Sorry- there is simply no way a "family farm" can owe so much in Federal estate taxes as to force it to be sold off- it is mathematically impossible.

So, if you could tell me how much the "family farms" approx NET value is, I can show you, with solid calulations that they cannot & will not owe so much Fed estate taxes to need to sell the farm. And, they should properly plan the estate so it avoids probate- as probate can eat half the cash value all by itself. See a good attorney, he can set it up for them.

dewey does have a bit of a point- 675K is not that much in some areas of the country with very high land values. But, again- a farm needs to be over 4.1 million to owe estate taxes. FOUR MEGABUCKS is not "chicken feed" anywhere.


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