Special Estate Tax Provisions for Farmers Should Be Simplified To Achieve Fair Distribution of Benefits

PAD-81-68: Published: Sep 30, 1981. Publicly Released: Sep 30, 1981.

Additional Materials:

Contact:

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO examined two provisions added to the Federal estate tax law by the Tax Reform Act of 1976 to help farm families retain farmland after the death of the owner. The provisions are, specifically, special use valuation and deferred and installment payment. The purpose of the review was to determine whether the provisions have been effective in promoting the stated congressional objective of reducing the number of family farms sold to pay estate taxes. The evaluation was conducted prior to enactment of the Economic Recovery Tax Act (ERTA) of 1981.

GAO found that, while the provisions have reduced tax burdens on farm estates, they have not helped to halt the decline of family farming. Estate taxes appear to have little to do with decisions to sell family farms; GAO found no case in which estate taxes had prompted the sale of a farm. GAO concluded that: special use valuation is difficult to administer and comply with; its complexity has tended to restrict its use to wealthy estates; farm estates with substantial value in equipment and buildings benefit less than estates with land composing a greater share of the estates' value; and farmers in different regions of the country are not equally able to take advantage of it. The use of the tax deferral provision does have merit, however, and its use would greatly simplify the assistance given to farm estates that incur an estate tax liability. However, ERTA lessens the need for the two special provision in the 1976 Act by allowing larger amounts to be left at death without incurring additional taxes.

Matters for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should replace special use valuation with a simpler alternative.

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should simplify section 2032A and its administration by substituting a simple exclusion of a fixed fraction of the farm estate.

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should adjust the length of the postponement of payment or the interest rate that a farmer is charged.

 

Explore the full database of GAO's Open Recommendations »

Sep 21, 2016

Aug 3, 2016

Aug 1, 2016

Jul 14, 2016

Jul 5, 2016

Jun 30, 2016

Jun 28, 2016

Jun 23, 2016

Jun 22, 2016

Looking for more? Browse all our products here