8
—Lancaster Farming. Saturday. Jdlv 7. 1973
DeothTaxes...
and the Fbmn
Ten years ago, a farmer
needn’t have gotten very con
cerned about the Federal taxes
due on his estate.
Most farms weren’t so large
but what they were under the
$60,000 tax exemption.
But in the past decade,
production assets per farm have
more than doubled, exceeding
$lOO,OOO last year. Federal estate
and gift tax exemptions,
however, have remained vir
tually unchanged since the early
1940’s
A new ERS study points out
that for the first time, these taxes
may begin to pose a serious
threat to keeping the family farm
intact
Big bite. In a study of 21 typical
owner-operator farm situations,
the USDA’s Economic Research
Service (ERS) found that death
taxes including those imposed
by the State-could, in the ab
sence of planned estate transfers,
take nearly 20 percent of total
farm capital of some types of
farms.
Even more serious than the
actual amount of death taxes is
the fact that most farms can’t
quickly convert assets to cash to
pay taxes Most of a farmer’s
assets are fixed-in land and
buildings-and a heavy death tax
load could require selling part of
the farm.
The subject is made even more
topical for farmers by the fact
that Congress is considering
major revisions of Federal estate
and gift tax laws.
Potential is there. So far, death
taxes don’t absorb a large portion
of capital on most farms. But
because farms have rapidly
grown in size and value in recent
years ... and because death taxes
are figured on a graduated scale
(from 3 percent to 77 percent for
the Federal estate tax), they are
taking an ever-increasing share
of farm capital. <*■
To illustrate, take a typical
Corn Belt hog-beef farm. If its
production assets increased at
the same rate from 1968 to 1972 as
did farms generally around the
country, its production assets
would have been $240,000 last
year. Federal and State death
taxes in this case would have
climbed from less than 2 percent
of farm capital in 1968 to 10
percent in 1972, due to the
graduated nature of the tax.
(This illustration assumes, for
convenience, that farm
production assets approximate
the gross estate, which may not
be the case in actual practice.)
In the lead. The Texas High
Plains’ irrigated cotton farms
had the biggest increase in total
potential death taxes during 1961-
68. Death taxes went from a tenth
of 1 percent to almost 20 percent
as capital per farm quadrupled.
Cash grain farms in Illinois
took a steep climb in these years,
too. Death taxes went from 1
percent to 9 percent of the estate
after allowed deductions. And
capital assets for the average
farm more than doubled.
To illustrate the liquidity
problem, let’s look at an lowa
study that, though published in
1959, remains the latest available
data.
Sudden death. Researchers
surveyed 76 farmers and found
that if these farmers were to die
on the day they were interviewed,
fewer than 10 percent would have
enough liquid assets to pay estate
settlement costs and death taxes.
In about 12 percent of the cases,
heirs would have to convert
farmland into cash—through
130 MODELS
12 TO 48 FOOT DIAMETER BINS
CAPACITY FROM 1700 TO 75,000 BUSHELS
SEE US FOR COMPLETE DESIGN & LAYOUT
TAILORED TO FIT YOUR NEEDS.
E. M. HERR EQUIPMENT,
R. D. h Willow Street
WE SELL, SERVICE AND INSTALL
borrowing or selling to pay costs
and taxes.
Of the 21 typical owner
operator farm situations EES
examined, all but four had 70 to 90
percent of their farm capital in
land and buddings.
The liquidity problem is
especially serious for large
farms. For instance, death taxes
can take from 15 to 19 percent of
total farm capital for cattle
ranches in the Northern Rockies
and Northern Plains and for
(Continued On Page 9)
INC.
717-464-3321
•r * *