Like many other farmers and ranchers, Tennessean Mike Brundige is worried a proposed change in tax policy will keep him from passing the family’s farmland on to his children and grandchildren.
Brundige farms with his two sons in Weakley County, in the northwestern part of the state. They represent the fourth and fifth generation, respectively, to farm that land. Brundige is counting on there being many more generations to follow.
“Our main goal is to keep the land in the family in hopes that it will continue to prosper and grow enough that any other future family members would have the opportunity to participate,” he said.
However, a proposal to eliminate stepped-up basis has Brundige and other farmers and ranchers worried their children and grandchildren will struggle too much with capital gains taxes to continue the family business.
Stepped-up basis allows a farmer to pay capital gains taxes only on the property’s increase in value since the land was inherited, not on the full increase in value since it was purchased by that farmer’s parents or grandparents.
Because the value of many farms is tied up in land and equipment, most farmers don’t have large amounts of money available to pay capital gains taxes. They could be forced to sell the farm or take out costly loans just to pay capital gains taxes. Even if a farmer only has to sell some of the land, that would limit the number of family members who join the operation.
As Brundige explained, his goal of keeping the land in the family won’t work if they have to sell off parcels of it.
He also noted that many people mistakenly think only the very wealthy get snagged by capital gains taxes, but it’s families like his who have spent a lifetime building farming, ranching and other small businesses who would be hit the hardest.
“The elimination of stepped-up basis would certainly lower the amount of assets that we were able to pass on to our children. There’s no reason to have them accountable for taxes that accrued on assets 40 or 50 years before,” Brundige said.
Farm Bureau is urging farmers and ranchers to tell Congress how critical stepped-up basis is to the continuation of their family businesses. Emails to representatives and senators can easily be sent from here.