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Farm Estate and Succession Planning

RSS By: Andrew Zenk

This blog focuses on making complex and difficult topics in estate and business planning understandable and applicable to the reader.

Andy is an Agribusiness Consultant for AgCountry Farm Credit Services, Fargo N.D., a farmer owned cooperative and part of the Farm Credit System serving eastern North Dakota and northwest and west central Minnesota.

Basis Differences of Land Transfers to Heirs: Gifting vs. Transfer at Death

May 20, 2011

I am often presented with the question as to whether it is better to gift land (or other assets) during life, or transfer them at death, through their estate plan. The answer depends on the facts and circumstances of each individual situation. However, there are some distinct differences with each transfer that is the same for everyone. A major difference involves the basis of the land. 

An asset's "basis" is the original value of an asset for tax purposes. In land transactions, this is usually the purchase price, plus any improvements. When you gift an asset in life, you are transferring your basis in the asset. This is known as "carry-over basis." Accordingly, the recipient’s basis in the asset you gifted them will be the same as your original basis. It is different when you transfer an asset at death. At death, the asset recipient will receive a "step-up" in basis. The basis of the asset in this case is determined by the fair market value of the asset at the date of death. The original owner’s basis in the asset is inapplicable. There are exceptions to these rules, and you should make sure you understand how the rules relate to your specific circumstances. 




Disclaimer: The information contained in this publication provides a general overview on various topics and is strictly for informational purposes only. The reader should consult a qualified professional for advice based on his/her specific circumstances. AgCountry Farm Credit Services and the writer of this blog make no representations as to the accuracy or completeness of any information on this site or found by following any link on this site, and shall not be liable for any errors or omissions herein or for any losses or damages resulting from the display or use of this information. 

Required Disclosure Pursuant to IRS Circular 230: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code; or (2) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.
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