— Published with Permission of FreeRangeReport.com —
“I managed the ranch for my mother who passed away in 2012. In 1977 the ranch was worth about one million dollars, in 2012 it was worth over 20 million. My mother did no estate planning, had made numerous ‘gifts’ and we were hit with over five million in estate taxes.”
On September 8, the National Cattlemen and Beef Association (NCBA) issued a statement of support for President Trump’s tax reform proposals. Not surprisingly, the association, comprised largely of ranchers with small to medium private operations, is focusing ‘heavily on the death tax.’ Landowners, farmers and ranchers, are often property rich but cash poor, and the estate inheritance tax, known popularly as the ‘death tax’ is daunting to those who want to keep their land and ranching assets in the family. The NCBA statement says:
“We have a once-in-a-generation opportunity to enact truly comprehensive tax reform, and we can’t afford to let this opportunity pass or to get it wrong,” said NCBA President and Nebraska cattleman Craig Uden. “Family ranchers and farmers deserve a full and permanent repeal of the onerous death tax, which charges them in cash on the often-inflated appraised value of their property and equipment. This campaign will shine a spotlight on the stories of real ranchers who have had to deal with this issue, and it will also highlight current tax provisions that we need to maintain, such as stepped-up basis, cash accounting, and deducibility of interest payments.”
Free Range Report interviewed Western Colorado rancher, Kelly Couey, whose ranch of 3,000-plus acres, has been in his family for several generations. Located near Silt, the Couey ranch abuts some prime properties near Aspen and other high-end resort communities. Development properties next door are skyrocketing in price, complicating the valuation of his acreage. His struggles with the IRS have dragged on for years, and cost him millions. He regrets the lack of proper financial planning on the part of his mother, from whom he inherited the ranch. Couey told FRR, “My father died in 1977 when I was 17, for the next 35 years I managed the ranch for my mother who passed away in 2012. In 1977 the ranch was worth about one million dollars, in 2012 it was worth over 20 million. My mother did no estate planning, had made numerous ‘gifts’ and we were hit with over five million in estate taxes. With proper management, we would have paid none to very little in taxes. I often regret the 18 hour days, seven days a week I spent building this place up to now have to sell part of to pay taxes on my energies to build my mothers estate.”
But the lack of proper financial planning on the parts of older parents is not unique, and the ‘death tax’ sorely punishes those whose parents either lacked the acumen or simply didn’t have the time to address the implications of leaving their ranches and farms to their heirs. As part of its PR campaign promoting permanent repeal of the ‘death tax,’ NCBA has launched the website CattlemenForTaxReform.com, which features video comments from others whose lives have been impacted by estate inheritance taxes.
Jay Wolf, Nebraska: “You’d think in operating a business like this, the most important decisions would be strategic decisions about buying or selling cattle or buying and selling land. Instead the most important decisions I’ve made have been estate-planning decisions, and they have impacted our ability to maintain our operation more than anything else – and that doesn’t really seem right.”
Kevin Kester, California: “Without a doubt the biggest challenge that keeps me up at night is trying to figure out how to pass the ranching operation – our family operation on to the next generation. The current tax code is…leading toward more fragmentation of farms and ranches, which is not good for the environment or our ranchers and farmers.”
Beyond bringing to light stories of ranchers and farmers negatively impacted by the death tax, the NCBA campaign is designed to educate elected officials as well as the general public, about how burdensome the death tax can be to food producers. Estate taxes paid to the IRS because of the death tax equate to an enormous loss of wealth for family farms and ranches. Although in the United States relative numbers of farmers and ranchers is small in comparison to other professions, their responsibility in feeding Americans, and indeed the world, is incalculable. Although most Americans may never have to deal with the death tax, it effects everyone in the markets and at our dinner tables.