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Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2430
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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We have a qrt. of land that is in crp and we will be taking

Customer Question

We have a qrt. of land that is in crp and we will be taking it out of the program and planting it next year. I have several options but not sure what is the best for us. #1 is to sell it at $3,000 an acre which is 480,000. #2 keep land and farm it myself even tho we live 9 hrs. away would just have it custom farmed by family or friend. # XXXXX Purchase land in Laramie Co wy which is 1,800 deeded with 160 acres Stae and 80 acres BLM lease. With this purchase I would put down 500,000 and my kids would carry the rest. The total of the sale would be 800,00. What do you think would be the best choice. We are in our early 50's and hope to retire by 60. My husband has cancer also. Prognosis is good with 80% chance of survival. The land in South Dakota after expenses would bring in if farmed 25,000 on a bad year and 50,000 + in a good year. Whereas the land in Wyoming would not produce any income per year except renting out pasture land.
Submitted: 5 years ago.
Category: Tax
Expert:  Anne replied 5 years ago.


Thank you for using justanswer I'm sorry to hear the news about your husband, but I'm so glad that his prognosis is so high!

.This is a GREAT question, but what it really will come down to is how much do you think you and/or your husband want to spend the time and $ farming the land, or allowing someone else to farm the land and you get paid either on a % of profit, or you may rent the land at a set price per acre, regardless of what the profit or loss to the person farming your land gets.

Or, do you want the money now in order to get out of the farm industry, or you can always let it sit idle without farming it, (still paying the property taxes of course) if you have reason to believe that the land will appreciate in value within the next few years.

When you spoke to your financial advisor, did he talk to you at all about setting up a trust?

The process for creating a trust in South Dakota involves two steps. First, you must create the trust on paper by drafting a trust agreement or declaration of trust. A qualified estate planning attorney can help you in doing so. This document identifies the beneficiaries of your estate and the individual or individuals you wish to appoint as trustee. State law permits you to serve as your own trustee, but you must also name at least one successor trustee. The trust agreement must be signed by you and notarized. Once you've created the trust, you can begin transferring your assets into it, including real estate, bank accounts and investment holdings.

One of the primary advantages of establishing a trust in South Dakota is that it allows you to avoid the probate process. During the probate process, the state will appoint an executor to inventory your assets, locate your heirs and serve notice to your creditors. If you have a will, your property is eventually distributed according to its terms. If not, your assets are distributed according to state inheritance laws. The contents of your estate become a matter of public record. With a trust, you avoid this process completely, allowing your estate to remain private and your beneficiaries to receive their inheritance much more quickly
South Dakota is unique in its tax treatment of trusts in that it imposes no income tax or capital gains tax on the trust or its beneficiaries. This can mean a substantial savings for you and your beneficiaries. However, assets held in a trust may still be subject to federal estate tax when you die, depending on the amount of your assets and the type of trust you create.

Since WY also does not have any personal income tax, there should be no problem transferring the land from WY to your trust in SD, however you would want to person that draws up the trust to be sure. (I did my homework on this subject, but as a tax person, I can't really advise you on this particular aspect of the trust)

By putting everything into a trust, you avoid the capitals gains tax on the sale of the land, the money is still there for you and your children to use.

Generally, there is no Federal income tax on distributions from a trust either.

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.