In many cases, farmers are not only in the business of agriculture, they are in the business of family. Many farms are driven by a family effort, with children learning the ropes as they grow up. The average age of farmers in Florida is 57, only a few years shy of the average retirement age. This raises the question: What will happen when you make the decision to step down?
One option is transferring the farm to a family member by sale. With this method, you must report the sale, as well as measure the gain or loss associated with it for income tax purposes. A portion of the assets sold also may be subject to self-employment tax. Despite the tax consequences, there are benefits to this method, specifically that the proceeds from the sale can be used to fund your retirement.
Another option is to transfer the farm as a gift to a family member. However, don’t let the phrase “gift” fool you. You are still required to pay federal gift taxes on assets transferred based on their fair market value. Luckily, you can gift up to a certain amount without having to pay taxes. The annual exclusion for gift taxes currently is set at $14,000.
Before passing along the reins, remember to consult with both your family and your financial advisor. Each family is unique, and it is important to take the time to decide how to transfer the power, while preserving your farm’s success.
CREDITS
column by STEVEN E. CRISMAN
BIO: Steven Crisman is an audit partner at Cross, Fernandez & Riley LLP (C/F/R) and leads its Agriculture Practice Group. He primarily serves the agriculture, manufacturing, warehousing and distribution industries. He has specific experience with citrus growers, cattle ranchers, citrus and other horticultural nurseries, citrus harvesters and other support industries as well as watermelon, blueberry and other growers. In addition, Steve provides comprehensive tax and estate planning, attestation and business succession planning services.
