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Why Should Farmers & Ranchers Care About Section 2032A?
Section 2032A is designed to provide an estate tax savings to certain farmers and ranchers. It can allow you to value your real property at an amount that is less than its highest and best use (i.e. housing development); which is how it would normally be valued for purposes of the death tax. For 2010, the maximum amount the value can be reduced is $1,000,000. In future years, the $1,000,000 will be adjusted for inflation, rounded down to the nearest $10,000. So at a 45% estate tax rate (assuming congress finally settles on the same rate as in 2009), the potential death tax savings is $450,000. For some taxable estates of modest size, with less valuable farm or ranch properties, a $1,000,000 reduction in value might help solve your estate tax liquidity problem. For larger estates with more valuable properties, it might be just a spit in the bucket.