Dec 27 2012
By Shad Olson
In just a matter of days, the death tax will nearly double the first of the year as an often overshadowed portion of that dreaded fiscal cliff. And for ranchers and farmers in South Dakota it will make it even harder to keep the family farm in the family.
Rancher David Lindblom south of Rapid City, spends another day checking prices, and checking his herd. And another day contemplating big changes in the livelihood he and his family have loved for years.
"What they're looking for top prices in 2013 and then a steady decline over the next six to seven years. And this ranch is big enough that there's three generations on it right now." Lindblom said.
And on January first, another change that will make planning for an uncertain future an even more intricate task. The so-called, death tax is going up.
Barring a last minute congressional reprieve, the estate tax, will go from 35% on holdings over a 5-million dollars to 50% on anything over one million dollars in value: A massive bump in a tax frequently responsible for keeping younger generations from hanging on to the family farm.
"There's an old saying amongst ranchers that they live poor and die rich meaning they have a lot of dollars tied up in assets and very little dollars tied up in cash." Lindblom said.
If a landowner leaves their $6-million estate to their children, half the inherited value over one million dollars would amount to two and a half million dollars in tax. Barring other assets or cash on hand, the family could be forced to sell half the land to pay the bill, a five times increase over the present rate. Differences in real estate valuation complicate the issue.
"If it was bought at a grazing value and then sold and assessed for estate purposes at development value there's no way we can afford the inheritance tax on that." Lindblom said.
"We need to know what it's going to be so we can start working with our tax advisors accountants and attorneys."
Farm state politicians and the ag constituents they serve are all hoping for a last minute fix in Washington D. C.
Republican Congresswoman Kristi Noem is no exception. Noem says the death tax is only one example of the damaging impacts threatened by the end of the Bush era tax cuts.
"There's been many different groups that have come out and shown us that raising tax rates at this time just isn't the answer," Noem said.
To read more: http://www.newscenter1.tv/stories/12960.aspx