As Benjamin Franklin famously declared, the only things certain in life are death and taxes…but the ag/family business exemptions enacted in recent years are reducing the Pennsylvania inheritance taxes for many farm families. With proper planning and action, both before death and even after death, these inheritance tax savings can be substantial.
The use of formal contracts in agricultural production, including crop growing and livestock production arrangements, has been on the rise in recent years. If you find yourself wondering whether it’s worth it to have a formal agreement in place in a production relationship, remember that the purpose of a formal contract is to minimize risk.
“Basis” is a tax term used to describe an owner’s financial investment in a property. When that property is sold, the basis is the gauge for determining whether there is gain or loss from the sale and the resultant income tax consequences of the transaction, if any.
The majority of crop leases are verbal. This informality works in most instances and that is why so many crop lease arrangements are verbal or the original lease agreement has not been updated for a decade or longer. However, when the landowner unexpectedly terminates the lease, the loose legal terms can make the separation more challenging…and potentially expensive.
Oftentimes these lifelong savings are expended on the cost of long term care. To the farm community, this reality presents far more catastrophic consequences by threatening the farmer’s ability to preserve the family farm for future generations.
Farming often involves tilling soil and other activities that change the surface of the land. In addition, farm operations can involve the storage and use of liquid fuels and fertilizers. All of these activities potentially involve state and federal environmental laws such as the Pennsylvania Clean Streams Law and Solid Waste Management Act.
The question of whether to form a legal entity to manage and run your agricultural operation is often a major concern for farmers.
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