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Understanding Potential Pitfalls in the Estate Tax for Forest Landowners

Understanding Potential Pitfalls in the Estate Tax for Forest Landowners. Tamara Cushing June 27, 2012. What exactly is my estate?. The Estate Tax. Involves assets owned at time of death $5,120,000 exemption 35% over that. Uncertainty. December 31, 2012 January 1 , 2013 Planning???.

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Understanding Potential Pitfalls in the Estate Tax for Forest Landowners

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

  2. What exactly is my estate?

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

  4. Uncertainty • December 31, 2012 • January 1, 2013 • Planning???

  5. Valuing your assets • Value = quantity x price • Inventory & current market prices • Assets valued at fair market value on date of death (in general) • 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

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

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

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

  9. Dr. Tamara L. Cushing tcushin@clemson.edu www.clemson.edu/extension/forestry Find us on Facebook: www.facebook.com/fnrclemson

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