4 Replies to “what percent is assessed for capital gains tax on farm land?”

  1. Property transfers between related parties are not a sale; and it takes a sale with money changing hands to trigger any kind of capital gain or tax.

  2. first of all, if the property has been given to the son the value of the property may be such that the gift exceeds the limits and the parents will be responsible for paying the gift tax
    now when the son is ‘given’ the property, the value of it at that time is the basis for determining the capital gain made when it is sold
    short term, is ordinary rates of the taxpayer’s income, long term until Dec. 31 is 15%
    rather than gift the property to the son, write a notes payable contract with a stated amount of interest for the current value of the property, be sure both parties have copies of this note

  3. A parent giving a farm to a son might or might not generate a gift tax for the parent, depending on the value of the gift and the parent’s prior giving history. There’s no capital gains tax involved. The CG tax would come if and when the son sells the property.

  4. If the parent sells the property to the son, the capital gains tax is 15% of the fair market value of the property minus the purchase price. There may be adjustments to the purchase price if certain improvements were made to the land (e.g. assessments, clearing).

    If the sales price to the son is less than the fair market value, the difference is a gift and the parent may be required to file a gift tax return. No tax will be owed unless the value of gifts exceed $ 1 million during the lifetime of the parent.

    If the entire transaction is a gift, no capital gains tax will be owed. The capital gains tax will be deferred until the son sells the property, and the capital gains tax will be based on the basis (usually the purchase price) of the property in the hands of the parent when he gifted the property.

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