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The host is an idiot when it comes to estate taxes. He said there is no such thing as a farm death tax, and after administering three estates himself, he knows that the death tax doesn't affect very many farms or ranches, and therefore is not a problem.
Although I live in PA now, our ranch, the ranch I grew up on, is in the Hill Country of South-Central Texas, about 45 miles northwest of San Antonio. My dad never made more than possibly $12,000 or $14,000 a year off that place. But because that area has become a very popular retirement and recreational area, the farms and ranches are worth a ton.
At current levels, the estate tax exemption is $3.5 million. Our last 1,000 acres sold for almost $5.5 million. That has not passed to us...the children...yet.
What that means for anyone trying to keep the place in the family, let's say a place our neighbor's size, which is 7,500 acres, is a taxable estate of over $41 million dollars. Your host is going to tell me that isn't a problem???
I don't know where his experience handling a whole, whopping 3 estates took place, but it wasn't anywhere I'm familiar with.
In addition, although the estate tax exemption is unlimited in 2010, by 2011 it reverts to $1 million. So my neighbor's parents would have to pass away in 2010, or else they're screwed! And that's not taking into consideration any changes Congress may make to the estate tax laws.
In the Hill Country of Texas, 7,500 acres will be hard pressed to run 200 animal units. It's canyons, rocks, and cedar, mostly, with some really pretty country interspersed. But it's not good ranching country. You can make a living, barely.
Assuming they run 200 mother cows, at current feeder calf prices, and average costs, with 80% production every year, you'd sell 160 calves (if you didn't keep any) for about $400 a head, after feed and upkeep. $64,000 gross, before taxes.
Running 200 head of cattle is a lot of hard work, by yourself. And you're not going to make anywheres near enough to pay the estate taxes on $41 million in value! Even assuming a deduction for the parents' basis, the estate is going to be multiple tens of millions. My dad's basis was less than $100 an acre, on land that sold for $5,500 per acre!
By the way, I have friends and relatives who have written some big checks to the IRS, and who only had the money to do so because they sold the place. Couldn't keep it if they wanted to. So tell your host he's way off the mark. Estate taxes are a problem, when you're trying to hold on to the place. And they're unfair when you sell it, too.
The only "myth" is that the left has a grasp on the facts. The claim that the death tax only impacts "100 small businesses and farms" the arbitrary definition that a "small business or farm" is only worth $5 million. Many small businesses are valued well in excess of $5 million, even though they only employ several dozen workers. This definition also ignores family businesses, which often are particularly vulnerable to the death tax.
For more information, please visit: www.nodeathtax.org.