If you are thinking about selling a ranch or farm, there are vital financial and tax planning issues of which you need to know. Planning prior to a sale is crucial for recognizing these issues and for instigating strategies to address them.
List Your Property for Sale
Your farm/ranch probably represents a huge amount of your net worth. Who you pick to list your property with is a very important decision. Picking an adequate ranch broker will not only aid you in getting a top price for your property but will help you have a smooth transaction.
Taxation of Farm/Ranch Assets
Different tax treatment and rates apply to the various types of assets associated with the sale of a ranch or farm. How you distribute the sales price to the assets of your ranch will decide the tax you may pay in the end. It is critical that you get guidance from a tax advisor when purchase price allocation is in negotiation.
Below is a list of the ways investors may be taxed on the sale of a ranch or farm:
Federal Ordinary Income Tax: Taxpayers will be taxed at rates up to 40.0% depending on taxable income.
Depreciation Recapture: Taxpayers will be taxed at a rate on all depreciation recapture.
Federal Capital Gain Taxes: Investors owe federal capital gain taxes of either 15% or 20% on their economic gain relying upon their taxable income.
New Medicare Surtax: The Health Care and Education Reconciliation Act of 2010 added a new Medicare surtax on net investment income. This Medicare surtax applies to taxpayers with net investment income who exceed threshold income amounts of $200,000 for single filers and $250,000 for married couples filing jointly.
Tax Saving Tools for Selling Appreciated (or Depreciated) Property
Selling extremely appreciated (or depreciated) property can bring you a huge tax bill. Taxes due on the sale may range from 25% to 55% of the sale price according to the cost basis of your property and how your property is owned.