Free Wealth Management Guide Financial Strategies For Selling A Farm Or Ranch

Financial Strategies for
Selling a Farm or Ranch
By: Christopher Nolt, LUTCF and John Clark, CPA
An Educational Resource From
Solid Rock Wealth Management

Selling a farm or ranch typically creates significant tax
consequences. Without proper planning prior to a sale,
the wealth a family has worked a lifetime to create may
be eroded by up to 50% or more.  

This Wealth Guide will illustrate the sale of a highly
appreciated $15 million ranch. The ranch is owned by
a married couple ages 65 and residents of Montana. It
will examine how the use of proven wealth preservation
strategies can allow a family to:
·      Decrease taxes paid on the sale
·      Increase annual income for retirement
·      Increase wealth passed to heirs
·      Increase money left to charitable organizations

The advanced planning strategies include:
·      IRC Section 1031 Tax-Deferred Exchange
·      IRC Section 664 Charitable Remainder Trust
·      IRC Section 121 Personal Residence Exclusion
·      Strategic sale price allocation
·      Irrevocable Life Insurance Trust

Four sale scenarios are illustrated:
Option 1: Straight sale for cash of the entire $15 million
ranch
Option 2: Straight sale for $10 million and 1031
Exchange for $5 million
Option 3: Straight sale for $5 million, 1031 Exchange for
$5 million and Charitable Remainder (CRT) Trust for $5
million
Option 4: Straight sale for $5 million, 1031 Exchange for
$5 million, Charitable Remainder Trust for $5 million and
purchase of a $5 million Second-To-Die Life Insurance
Policy in an Irrevocable Life Insurance Trust (ILIT)

Below is a summary of each of the four options. The
pages that follow provide greater detail. Scenarios are for
illustrative purposes only and are not intended to represent any one particular situation.

Summary
Option 1

Option 2

Option 3

Option 4

Straight Sale
Federal and State
Income Tax Liability
Annual Income
from Reinvestment
To Charity Upon
Second Death
Net Estate Passed to
Heirs

1031 Exchange &
Straight Sale

1031 Exchange, CRT
& Straight Sale

1031 Exchange, CRT,
ILIT & Straight Sale

$2,890,200

$1,980,486

$638,074

$638,074

$847,686

$911,366

$1,005,335

$870,335

$0

$0

$5,000,000

$5,000,000

$19,516,837

$23,525,457

$22,565,485

$25,529,095

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