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The Effect on Family Farms of Changing Capital Gains Taxation at Death

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  • McDonald, Tia M.
  • Durst, Ron
  • Whitt, Christine

Abstract

This report presents a method for assessing impacts of changes to capital gains taxation at death for family farm estates, an approach which accounts for the structural changes in a person’s wealth portfolio that often occurs as a person ages. The method is applied to the American Families Plan, which proposes to eliminate stepped-up basis for inherited assets greater than $1 million for individuals’ estates and $2 million for married couples’ estates while deferring capital gains tax liability on business assets as long as the business remains family operated. The results suggest that of the estimated 32,174 family farm estates in 2021, 1.1 percent would owe capital gains taxes at death, 18.2 percent would not owe capital gains taxes at death but could have deferred tax liability if the farm assets do not remain family-owned and operated, and 80.7 percent would have no change to their capital gains tax liability.

Suggested Citation

  • McDonald, Tia M. & Durst, Ron & Whitt, Christine, 2021. "The Effect on Family Farms of Changing Capital Gains Taxation at Death," Economic Brief 320794, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerseb:320794
    DOI: 10.22004/ag.econ.320794
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    References listed on IDEAS

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    1. Ahearn, Mary C. & Perry, Janet E. & El-Osta, Hisham S., 1993. "The Economic Well-Being of Farm Operator Households, 1988-90," Agricultural Economic Reports 308266, United States Department of Agriculture, Economic Research Service.
    2. Ani L. Katchova & Mary Clare Ahearn, 2016. "Dynamics of Farmland Ownership and Leasing: Implications for Young and Beginning Farmers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(2), pages 334-350.
    3. Mishra, Ashok K. & El-Osta, Hisham S. & Morehart, Mitchell J. & Johnson, James D. & Hopkins, Jeffrey W., 2002. "Income, Wealth, And The Economic Well-Being Of Farm Households," Agricultural Economic Reports 33967, United States Department of Agriculture, Economic Research Service.
    4. H. Frederick Gale, 1994. "Longitudinal Analysis of Farm Size over the Farmer's Life Cycle," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 16(1), pages 113-123.
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    Keywords

    Farm Management; Financial Economics; Land Economics/Use; Research Methods/ Statistical Methods;
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