Sell farmland and defer the capital gains tax by reinvesting in like-kind property. We guide agricultural families through the strict IRS timelines and rules that make or break a successful exchange.
When a farm family sells land that has been held for decades, the capital gains tax can be massive. Land purchased for $500/acre in 1985 that sells for $8,000/acre today generates $7,500/acre in taxable gain. At combined federal and state rates, that’s $1,500-$2,000/acre in taxes — on a 320-acre sale, nearly $500,000 going to the government.
A 1031 Exchange allows you to defer that entire tax bill by reinvesting the proceeds into replacement property. The key word is “defer” — the tax is not eliminated, but with proper estate planning, it can potentially be eliminated at death through stepped-up basis.
A 721 Exchange allows you to contribute appreciated farmland into a REIT in exchange for operating partnership units — providing tax deferral, diversification, and passive income.
Both types have strict IRS requirements, including the 45-day identification period and 180-day closing deadline. Missing these deadlines means the exchange fails and the full tax is owed. As part of our comprehensive farm real estate practice, we coordinate every step to ensure compliance.
Here’s where 1031 exchanges and estate planning intersect powerfully. When you do a 1031 exchange, the deferred gain carries forward to the replacement property. You owe that tax if you ever sell the replacement property without doing another exchange.
But here’s the key: if you hold the replacement property until death, your heirs receive a stepped-up basis — meaning the property’s tax basis resets to its fair market value at the date of death. The deferred gain is never taxed. It disappears.
This means a properly planned series of 1031 exchanges, combined with a trust-based estate plan, can result in generational farmland transfers with zero capital gains tax — completely legally.
We coordinate 1031 exchanges with your broader estate plan to achieve maximum tax efficiency across generations.
We don’t do hourly billing, and we don’t hand you a stack of paper and wish you luck. Our process is designed to be transparent, thorough, and completely finished when we’re done.
Before listing the property, we structure the transaction as a 1031 exchange. We select a Qualified Intermediary and set up the exchange agreement.
The relinquished property closes and proceeds go to the QI — never to you. Within 45 days, we help you identify replacement properties in writing.
We coordinate the purchase of replacement property within the 180-day deadline. We ensure all documentation is proper and the exchange is complete.
Tax-deferred transactions for farmland.
We guide you through the entire exchange — from structuring the sale to closing within the 180-day deadline.
For landowners who want to diversify out of farmland into a REIT while deferring capital gains.
We coordinate with your CPA to track basis, calculate deferred gains, and ensure the tax reporting is handled correctly.
If you’re considering a sale, talk to us first. A properly structured exchange could save your family hundreds of thousands in taxes. Free consultation.
