Understanding Potential Pitfalls in the Estate Tax for Forest Landowners Tamara Cushing June 27, 2012.

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Presentation transcript:

Understanding Potential Pitfalls in the Estate Tax for Forest Landowners Tamara Cushing June 27, 2012

What exactly is my estate? Cash and bank accounts Stocks and bonds House & belongings Insurance policies? Business assets Land & trees

The Estate Tax O Involves assets owned at time of death O $5,120,000 exemption O 35% over that

Uncertainty O December 31, 2012 O January 1, 2013 O Planning???

Valuing your assets O Value = quantity x price O Inventory & current market prices O Assets valued at fair market value on date of death (in general) O Fair market value – price which property would change hands between willing buyer and willing seller neither under any compulsion to buy or sell and both having reasonable knowledge of all relevant facts

Special-Use Valuation O Allows land to be valued at its current use rather than highest and best use O Up to $1,040,000 reduction in value

Special-Use Valuation O Must transfer to qualified heir O Used as farm for 5 of past 8 years O Must have participated in farm activity O Value of property must be at least 25% of total estate O Combined value of real & other business property at least 50% of gross estate

Recapture of tax benefits O Special use rules apply to heir for 10 years O Triggered when: O Property sold to unqualified heir O Property no longer in qualified use O Lack of participation by heir Recapture consists of tax benefit plus penalty

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