Biden tax proposals may disrupt agriculture

– Increase in top tax rates from 37% to 39.6% for singles earning more than $ 452,700 and married people who collectively earn more than $ 509,300.

– Increase long-term capital gains and qualifying dividend tax to 39.6% for individuals with taxable income of $ 1 million or more. This would not apply to capital gains and dividends until the $ 1 million threshold is reached. What would be even more alarming would be that the maximum rate would come into effect on April 28, 2021.

– Implement a property transfer tax. Transfers of valued property would be subject to capital gains tax if realized gain exceeded $ 1 million. The realized gain is the difference between the fair value and the adjusted basis of the asset.

The transfer tax would apply to lifetime or death transfers, and the $ 1 million lifetime exemption could be carried over to the spouse if not in use (portability). The transfer tax appears to apply to all valued real estate including land, equipment and grain inventory. This also applies to trust or partnership distributions.

Payment of real estate transfer tax for certain businesses, such as B. farms, can take place over a period of 15 years … subject to a security deposit (ie a lien). And if the property continues to be family owned and operated, no tax is payable until the business is sold or is no longer family owned / operated. However, the family is not defined and there is no mention of whether any interest would accrue until the recognition event. The capital transfer tax is expected to come into force in 2022.

– 1031 exchanges would be limited to postponing a profit of $ 500,000 per person per year (accumulated over the whole year). It’s unclear if this applies to properties that will be sold in 2021 but will not be replaced until 2022.

– Certain limited partners and S Corp shareholders who are significantly involved are subject to SECA tax (self-employment tax) on the distributing share. This is a significant change in tax law and can undo the benefits of farming under an S-Corp.

I know what you’re thinking. Will the law? The short answer isn’t everything. However, this is backed by President Biden and presumably the Democrats in Congress. I cannot stress how disruptive and harmful these proposals could be to agriculture. It is clear that many in Congress have no idea what it is to be a farmer.


DTN tax columnist Rod Mauszycki, JD, MBT, is the tax director at CLA (CliftonLarsonAllen) in Minneapolis, Minnesota. Read Rod’s Ask the Taxman column at You can email Rod at [email protected].