Avoid paying tax on your farm

Selling your farm or ranch may already be a big step for you. A property so vast and essential for the society and environment needs to be taken good care of and sold to the right owners. However, selling that kind of property comes with a price- literally.
Your tax bill associated with the property you are selling can be downright outrageous. Why people opt for strategies to minimize these bills and take control of their finances.

One of these methods is income exchange properties. Which basically means exchanging your vocationally occupied property for another like-kind property. But be warned that it is not as straight forward, there are some strings attached to the concept. For example, you can the property can only be exchanged in place of like-kind property, but that does not necessarily imply what it sounds to be like. You can exchange a penthouse for an office or a farm for a mall. Like-kind means that both the properties will be for business or investment and not personal use per se.

You may exchange businesses but you cannot swap your family home. However, the list of all properties which may or may not qualify to be exchanged can be vague, as an item of personal use like residence cannot be exchanged but a piece of art might. To clear any misconception regarding your property’s qualification and clearance to be exchanged it is important you consult a lawyer or an agent and get it authorized.

The good news is that if your farm passes this qualification, you can exchange it with other properties without having cashed out. This is why you would not have to pay a huge tax bill because technically you never get the money. You will not have to do your taxes until the time you decide to cash your farm or property out or sell it for good, without exchanging.

However, it is unlikely that you will find a property you would want to exchange your farm with at the same time that property would want a farm in exchange for it. The process involves a middle party that can manage the swapping process. You can select three properties you would want to replace yours with until you finally decide which one to close the deal with. Timing is crucial when exchanging your farmland because once you close the sale of your property you only have 6 months to acquire the replacement property. If there is a discrepancy in the market value and rate of both the properties, the remaining portion of the money will be taxed and made a capital gain as you finalize your replacement.

Nonetheless selling your farm or ranch is a big decision as the land has so many resources to offer, which is why it is wise to analyze the market first and make sure you are choosing the right property at the right time.


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