Assume that the farm property shown below has been physically farmed by the decedent for the last thirty years. He willed it to his favorite son, who will continue to farm it.

a. In each of the independent cases, indicate whether or not special use valuation is available. The values shown for the farm assets are their fair market values as computed under the highest and best use concept.

b. Assume in each of the cases that the real estate consists of 1,000 acres, the average gross cash rent is $30 per acre, and the average real estate taxes are $5 per acre. Further assume that 10 percent is the average annual effective interest rate charged by the Farm Credit Bank.

At what amount would the parcels be valued per Section 2032A for 2019?

c. Refer to case 1. Five years after the farmer's death, his son sold the entire farm realty to a land speculator for

$2,000,000. Assume that the farmer decedent was not survived by a spouse and died in 2019, What are the tax consequences five years after the farmer's death? Who pays the tax cost? Use only the unified credit in your calculations.

d. Same as part

c, except that the sale occurs twelve years after the farmer's death.

Transcribed Image Text:

Bonds Stocks Farm real estate Farm equipment Mortgage against farm realty Accounting fees Appraisers' fees Adjusted gross estate & Taxable estate (1) 3,200,000 200,000 8,400,000 600,000 CASES (2) 3,000,000 400,000 6,150,000 2,550,000 (3) 3,200,000 300,000 8,300,000 300,000 12,400,000 12,100,000 12,100,000 (50,000) (80,000) (20,000) (25,000) (30,000) (25,000) (25,000) (40,000) (25,000) $12,300,000 $11,950,000 $12,030,000