What the New Tax Law Means for Agriculture

New article May 16, 2018 by Farm Credit Bank of Texas (land.com)

The largest overhaul of the U.S. tax code in three decades went into effect this year, impacting farmers, ranchers and other rural landowners in a variety of ways. For the most part, financial experts anticipate benefits for these groups.

“The 2018 tax law changes include several items that I feel will be beneficial to agricultural producers,” says Burl Lowery, a Brownwood, Texas, certified public accountant and director of Central Texas Farm Credit. “The increase in the exemption in estate and generation-skipping taxes to $11.2 million in 2018 will allow more farmland to be passed to future generations with less or no estate tax.”  READ ARTICLE

1031 Exchange Trends for 2016

From the 1031 Insider Newsletter, IPX Investment Property Exchange Services, Inc. January, 2016

FIRPTA – What the Change to FIRPTA Withholding Means for You
Under current federal law, if a foreign person sells US real property, the buyer is obligated to withhold 10% of the gross sales price and remit this to the IRS. Pursuant to the Protecting Americans from Tax Hikes Act of 2015, however, which became law on December 18, 2015 (the “PATH Act”), the required 10% withholding will increase to 15% for all closings occurring on or after February 16, 2016. There is an exception to the increase for sales of a personal residence wherein the sales price is between $300,001 and $1,000,000. Under this circumstance, the 10% withholding rate continues to apply. In summary:

If the sales price is $300,000 or less AND the buyer will use as a personal residence – No change, exempt from withholding.
For all other real estate sales the buyer must withhold 15% of the sales price of the real estate (10% if a personal residence with a sale price between $300,001 and $1,000,000) and send it to the IRS within 20 days after the date of transfer.

1031 Tax Reform Update
The most important news for the Section 1031 community coming out of the year-end tax and budget bills was the absence of any mention of §1031 as a “pay-for” for any of the expenditures in those bills. These are expensive bills, so non-mention of §1031 is a big win for all of us that have been so engaged in the campaign to increase the level of awareness that like-kind exchanges are not a loop-hole, but rather an important economic stimulator. Our major concern has been, and continues to be, that elimination of §1031 may be cherry-picked to pay for reduced tax rates and other governmental costs.


Outlook for Texas Land Markets

Outlook for Texas Land Markets.  It’s been a great conference in San Antonio this week. Currently, Joe Outlaw is discussing the changes to the Farm Bill.  Six Clift Land Brokers representatives are here at the conference.  Just another way for us to stay up on land issues and continue being the Land Experts. Why would you go any place else for your farm and ranch real estate needs?

House Committee Passes Bill to Repeal Death Tax

House Committee Passes Bill to Repeal Death Tax
Source:  Western Livestock Journal

 A divided House panel passed a bill March 25 that would repeal the federal estate tax-the “Death Tax.” The House Ways and Means Committee voted 22-10 to approve H.R. 1105, the Death Tax Repeal Act of 2015, introduced by Representatives Kevin Brady (R-TX) and Sanford Bishop (D-GA), sending it to the full House. Continue Reading…


Thinking Outside the Bowl Tax Deferral Strategies


DavidFisherI don’t know about you but every time I get a tax bill, I get mad. Its not that I mind paying my fair share of taxes because I don’t but rather because I know that my tax bill will be more than last year and my taxes will be wasted. I want my taxes to go to helping minority kids get educated, fixing infrastructure and providing benefits for military families while their loved ones are deployed all over the world protecting our way of life. Instead, my hard earned income and yours is going to help some member of Congress provide another pork project  for his district in an attempt to get reelected.

So that begs the question, “When buying or selling real estate, why wouldn’t you want to defer as much in taxes as is possible?” Clift Land Brokers agrees and have asked me to discuss some of Creative Real Estate Strategies thinking outside of the bowl tax deferral strategies that will help accomplish those goals.

Quite often when thinking about deferring taxes, a 1031 exchange almost always comes to mind. Although a 1031 provides a great opportunity to defer taxes, there are a number of potential pitfalls which can prevent the 1031 from being completed and any of these pitfalls can result in an immediate taxable event to the seller. For example, what if the seller is unable to identify one or more replacement properties within the 45 day identification period, a great replacement property is identified but there will be sales proceeds left over which will become immediately taxable or a great replacement property is identified but after the 45 day period expires, the seller starts making more demands on the buyer making a sale more difficult to complete. Creative Real Estate Strategies have tax deferral strategies that will prevent any portion of a 1031 from becoming immediately taxable and can prevent a seller from trying to use leverage after the 45 day period ends in order to get a better deal for themselves.

Before continuing, I believe that its important to mention that Congress is currently considering either modifying or eliminating 1031 exchanges. In my opinion, there is more reason for concern than in the past because now the republicans are beginning to think along those same lines so this bears close scrutiny. Having said that, there will still be an option to defer taxes when selling a property and that will be mentioned next.

Many times a seller would like to sell their property and retire but would still like to defer taxes. In this case a traditional 1031 won’t work but there are other tax strategies that can be designed that can defer capital gains taxes, state taxes where applicable and some if not all depreciation recapture for as long as the seller would like. Thus, the sellers have the ability to retire with a greater retirement income and are now free to move closer to their grand kids and spoil them to heights previously unknown to mankind as payback to their kids for being so miserable when they were growing up. If the individual decides to buy more real estate in the future, this strategy will work well because the cash flow can be used to pay the debt service on the new property while the proceeds from the previous sale are still taxed deferred for as long as the seller would like.

Clift Land Brokers is known nationwide for their ability and due diligence  in finding great income producing properties for their clients. Obviously a key component to buying/selling income properties is the rate of return. To that end, Creative Real Estate Strategies utilizes a well known but little used strategy in rural markets that will assist Clift Land Broker’s clients in helping them increase the rate of return on an investment property and making the property more appealing to both buyers and sellers.

Again, these strategies are just another reason to trust Clift Land Brokers when looking to buy that once in a lifetime property or when ready to retire and wanting to maximize retirement benefits from the sales proceeds. 


For more information, I can be reached at 713-702-6401 or email at david@cresknowsrealestate.com. My website address is www.cresknowsrealestate.com  

Best wishes.  David S. Fisher

(About David Fisher http://cresknowsrealestate.com/who-we-are/about-david/)

Higher Tax Rates on Land Sales

by Andy Biebl, CPA

With the slowdown in farmland appreciation, we may see retired landlords and investors willing to sell. But there is a new barrier; higher capital gain rates. With land sellers now often facing 23 to 25% federal rates plus additional state income taxes, we will see sticker shock and an unwillingness to deal. As we learned coming out of the Reagan era, higher capital gain rates suppress selling activity; lower rates stimulate ownership changes.

THE NEW RATES.  Previously, a large gain from the sale of farmland was taxed at a flat 15% federal capital gain rate regardless of the amount. But starting in 2013, as total tax return income moves up the ladder, three new tax rate increases apply to land gains…..Higher Tax Rates Deter Land Sales Article.pdf

Reprinted with Permission, April 2014, Telvent DTN LLC