Part 2: Reconciliation Bill Capital Gains Changes

Today is part two of a two-part series on capital gains tax and new provisions aimed at helping farmers and ranchers in the reconciliation bill. University of Wisconsin Madison division, Extension Farm ranch specialist Kelly Wilfert has a recent example.

“His dad bought land in that area. Wanna say it was back in the 50s or 60s, and at that point, there wasn't a lot of irrigation in that space. And so that land was only worth $3 an acre. And I'm wondering if maybe it was 300 but you get the sense of it wasn't a whole lot today, that land at fair market value is closer to $10,000 an acre.”

Wilfert explains that since the land is still owned by the producer's father, the original purchase price, known as the basis, is what determines the potential capital gains liability. The lower basis can result in significant tax exposure when the land is eventually sold.

“He were to sell it tomorrow, he would be taxed on the difference between 10,000 and that original purchase price, and he'd be looking at probably about a 20% tax rate on that now, again, comparing this to this new election, and if he did want to sell it tomorrow, he would still be able to do that, but he would only pay one quarter of The tax in year one, one quarter, the year following, and so on for the remaining two payments.”