46th Annual Society for Case Research & Global Jesuit Case Series Summer Workshop 2024

Experience level: 
Beginner
Intended Audience: 
Faculty
Authors: 
Kirsten M. Rosacker, Minnesota State University Mankato Robert E. Rosacker, Minnesota State University, Mankato

Succession Planning for Family Farms within the Context of Federal Tax Planning

This case focuses on the critical subject of succession planning for a sole proprietorship family farm within the context of federal tax planning. The family farm (IRC Sec. 2032A(e)(4)) is a time-honored tradition that has historically served as the bedrock of the U.S. economy. U.S. politicians have consistently indicated and provided strong and endearing support for family farms. They have offered, proposed, and advocated a view of the future where family farms remain essential to our economy. In support of this idea, Congress has legislated many provisions that care for and encourage the profitability and continuity of the family farm as a way of life. Amongst these critical legislative efforts are provisions supporting agricultural pricing (and thus profitability), programs that have continually existed since the 1930s. Several set-aside programs, managed by the U. S. Department of Agriculture, target conservation efforts, delivering payments to farmers for the non-productive crop use of some of their acreage. This provides support to farmers that can permit them to retain property ownership while not crop farming for one or more years. Long-standing income/gift/estate/inheritance tax provisions have been codified to provide favorable tax treatment, if invoked by the family farm owner, to encourage the passage of family farms to future generations. It is this latter topic that this case is directed explicitly at considering how to minimize aggregate federal tax payments when establishing the processes and procedures for the passing of the family farm to succeeding generations.