Newly Proposed Tax Reforms Could Have Huge Impacts On Multi-Generational Farms and RanchesMon, 09 Aug 2021 14:42:04 CDT
American Farmers and Ranchers are still reeling from a late-April announcement by the White House of a financial plan aimed to level the tax playing field. The Biden administration is calling the American Families Plan “a once-in-a-generation improvement in our nation’s future,” according to the White House website.
Included in the plan are tax reforms, one of which has farmers and ranchers questioning what the industry will be like for future generations. The Biden administration is moving forward with “eliminating long-standing loopholes, including lower taxes on capital gains and dividends for the wealthy, which reward wealth over work,” according to the Budget of the U.S. Government for fiscal year 2022, proposed to Congress on May 28,2021.
One of the loopholes the Biden administration is considering giving the boot is Stepped-Up Basis.
According to the Tax Foundation, “The step-up in basis provision adjusts the value, or ‘cost basis,’ of an inherited asset (stocks, bonds, real estate, etc.) when it is passed on, after death. This often reduces the capital gains tax owed by the recipient. The cost basis receives a ‘step-up’ to its fair market value, or the price at which the good would be sold or purchased in a fair market. This eliminates the capital gain that occurred between the original purchase of the asset and the heir’s acquisition, reducing the heir’s tax liability.”
Meaning the next generations of farmers and ranchers could struggle too much with capital gains taxes to continue the family business.
In a news article by the Farm Bureau, Tennessean Mike Brundige said he’s concerned about the possible tax legislation.
“The elimination of stepped-up basis would certainly lower the amount of assets that we were able to pass on to our children,” Brundige said. “There’s no reason to have them accountable for taxes that accrued on assets 40 or 50 years before.”
The Farm Bureau is urging concerned citizens to reach out to their representatives now to support the continued use of stepped-up basis .
You can read the entire article by the Farm Bureau, by clicking here.
To learn more about how Stepped-Up Basis affects you, click here.
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