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Study says loss of stepped-up basis would be detrimental to farm families

A newly released study says repealing the step-up in basis tax provision would be detrimental to family farms and ranches. Stepped-up basis allows land and other investments to pass from one generation to the next without capital gains taxation at the time of death.

Danielle Beck with the National Cattlemen’s Beef Association says the study, conducted by EY, developed a case-study based on a theoretical family-owned cow-calf operation to show the potential impact the stepped-up basis repeal would have on farms and ranches. “Looking at this farm, if it had been purchased in the 1990s, passed down to another generation today, it would result in a 280%, one-time tax liability compared to the farm’s annual income,” she says. 

Beck says it would likely force operations to be sold in order to pay their tax bills, and would have catastrophic impacts on the ability to pass farms and ranches from one generation to the next. “Paying a capital gains tax at the point of death is really an inequitable tax proposal when it comes to family-owned businesses across the board,” she says.  “We have been advocating and will continue to advocate for a tax code that makes sense and allows agricultural producers to remain thriving.”

The study also says repealing the tax provision would damage the gross domestic product and significantly decrease job creation. 

American Farm Bureau president Zippy Duvall says eliminating the stepped-up basis isn’t a tax on the rich, but a tax on the middle class.  AFBF and other ag groups are urging President Biden to remain true to his word and not increase taxes on hardworking, middle class Americans. 

The study was conducted for the Family Business Estate Tax Coalition, which includes almost 60 organizations representing family-owned businesses. 

AUDIO: Danielle Beck, NCBA

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