A 32 Lancaster Farming Saturday, Deceinbei 20, 2003
(Continued from Page A3O)
transferring property between
unrelated parties. They usually
create a tax obligation (capital
gains) for the seller and a debt
obligation for the buyer. Some
times parents and child are work
ing a farm together and provid
ing a living for two households. If
parents sell this farm to child and
the operation continues un
changed, the taxes and debt pay
ments can sink both families into
a cash flow crisis.
Discounted sales are often
used by parents in sales to a
child. The difference between
FMV and the sale price is consid
ered by IRS to be a gift. Just
make sure that your accountant
has enough aspirin to sort out
this basis headache!
Sale with life estate sometimes
used by mother to sell to son
gives her the right to live in the
house for the rest of her life. The
rent value of the house for the life
expectancy of mother should be
capitalized and the selling price
reduced by that amount.
Like-kind exchange is popular
in our region, as it postpones the
tax obligation of selling highly
appreciated real estate. The tax
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basis of the original property
transfers to that portion of the
property received in equal ex
change value.
Gifts given during lifetime can
transfer real property. The value
of the gift above the annual ex
clusion ($ll,OOO per person) will
be deducted from the Unified
Credit in the estate of the do
nor(s). The important thing to re
member is that the basis of the
property transfers with the gift.
Wills transfer all those things
owned by a person at death.
What is probated will depend on
title. Federal estate taxes appear
to be a diminishing problem, but
Pennsylvania’s inheritance taxes
are assessed on all estates. Wills
provide an opportunity for fami
lies to get a stepped-up basis in
property. Estate taxes are chang
ing regularly, so wills should be
reviewed and revised every three
years or when there is a signifi
cant change in laws or family cir
cumstances.
Trusts can be created to own
property during life or after
death. They may be useful vehi
cles or an unnecessary complica
tion - depending on your circum
stances. Weigh the advice of
**
Cine in the New year
trusted CPAs and attorneys on
both sides of the argument before
you create these things. Remem
ber that with a living trust your
job is not completed when the
documents are paid for. All prop
erty to be transferred through the
trust - and that means everything
you own if you are to avoid pro
bate - must be titled to the trust.
Otherwise you paid a lot of
money for a sheaf of useless doc
uments.
Intestate law is the will the
state has written to transfer your
property at death if you die with
no will to be found. It is irre
sponsible of any property owner
to put his/her loved ones through
the unnecessary hassles of this
form of estate settlement.
Conclusion
These comments from a man
agement perspective are not in
tended to be legal advice, nor are
they intended to provide you
with all the tax implications of
every real estate transfer situa
tion. It is vital that everyone
planning the transfer of any
property use the services and ad
vice of a competent accountant
and an attorney qualified in real
estate and also estate planning
processes.
Keep the family members up
dated on your intentions while
you explore the transfer options.
Make sure that heirs are willing
to shoulder the responsibilities
and obligations of real estate
ownership before you thrust it
upon them. An important obliga
tion of real estate ownership is to
plan for its disposition in such a
way that it will not create dis
putes or hardships among the
successors.
-I
Update On PDA’s
Ag Education Initiative
Dr. MeeCee Baker
Agriculture Education
Coordinator
Agriculture Secretary Dennis C
Wolff has made agricultural educa
tion a priority for the Department of
Agriculture (PDA). Since unveiling
the plan, PDA has already inspired
several efforts that encompass agri
cultural education activities targeted
to school-aged and life-long learners
as well as those familiar with agri
culture and the non-agriculturally
literate public.
Anchoring Wolff s agricultural ed
ucation initiative, the Department
launched a new website, www.mar
ketplaceforthemind.com in late Oc
tober. The site serves not only teach
ers and students, but also all citizens
of the Commonwealth. Teachers can
search the website to find curriculum
materials to support state academic
standards, grants to fund school
based projects, and traveling exhi
bits, which can bring technical ex
pertise to classrooms. The site also
offers listings of higher education in
stitutions conferring agricultural de
grees and scholarships to help stu
dents defray tuition costs.
Consumers can also review a list of
farmers markets offering fresh pro
duce, while families can find a grow
er that allows “cut your own” holi
day trees. Moreover, the website can
help farmers identify low interest
loan programs such as the Machin
ery and Equipment Loan Fun
(MELF). I encourage you to visit the
website to sample the myriad of in
formation available.
As part of the initiative, Secretary
Wolff has promised to teach lessons
about agriculture on a monthly
basis. His efforts in November result
ed in the teaching of more than 200
students statewide. On Dec. 19,
Wolff brought technical information
MeeCee Baker
concerning embryo transfer from his
home farm in Columbia County to
an advanced biology class at Indian
Valley High School in Lewistown.
He also met with Larry Welshans, an
Indian Valley Middle School Teach
er, who developed a junior high sci
ence class rooted in agricultural ap
plication. Wolff wrapped up his day
in Lewistown by reading a story
about milk production to elementary
students at the Sacred Heart School.
Secretary Wolff promises to con
tinue to focus on his agricultural ed
ucation initiative in 2004 by expand
ing the educational emphasis of the
Pennsylvania Farm Show and spon
soring agricultural education work
shops in the seven Pennsylvania De
partment of Agriculture regions
during February and March. For
more information about PDA’s Agri
cultural Education Initiative, contact
Dr. MeeCee Baker at c-meba
ker@state.pa.us or (717) 705-9512.