Capitol gains on farmland being sold vs 1035 Exchange
Does capitol gains need to be paid when gifting the profit to grandchildren? Any thing special to be done ?
Terry Says
Whoa — you need a estate planning attorney. If you own farmland and are selling it, you might want to wait and include it in your estate. Because of the “step-up” in value at the date of death, your beneficiaries would not pay ANY capital gains taxes if they sold the property immediately after your death.
If you must sell it now, yes you will pay capital gains taxes. Consult your tax preparer — because there might be some special tax considerations. Just know that any large gain is likely to not only incur taxes, but perhaps increase your Medicare Part B and D premiums, which are based on income. (And yes, this would be considered income on your tax return!). It could also make more of your SS benefits taxable.
Separately, you can gift up to $19,000 to anyone, and as many people as you want, in 2025. The gift is not a tax deduction, nor is it taxable to the recipient.
You could gift even more if you put the money in a 529 college savings plan for your grandchildren — assuming they are young enough to benefit from that. Most plans allow you to combine 5 years of the allowable gift (thus 5x$19,000) at one time. Again, this is not a tax deduction, but the money grows tax-free for college expenses.
