Possible tax changes boost year-end sales

2012-11-08T06:00:00Z Possible tax changes boost year-end salesBy Gene Lucht www.iowafarmertoday.com Iowa Farmer Today
November 08, 2012 6:00 am  • 

ADEL — The auctioneer is in full sale mode, rattling off a staccato listing of dollar figures for the piece of land being sold today.

Beau Dawes and his father, Nick, don’t raise a hand or make a bid.

“We’re really just seeing what the land is going for around the area,” Beau says.

“At this point, we’re just watching to see if it is still

going up or if it is starting to go down.”

Today, the land is still selling well. One 80-acre tract goes for more than $10,000 an acre. Another 70 acres go for more than $13,000 an acre.

“That’s a lot of money,” Beau says with a smile.

A young farmer who worked for Wells Fargo before returning to the family business, Beau sells seed and farms with his father.

Both men are watching a land market that has been skyrocketing for several years. They question whether the trend can continue much longer.

They’re not alone in asking that question.

“There are a lot of sales right now,” explains Steve Bruere, president of Peoples Co. in West Des Moines. “I see a drop off (in the number of sales) after the first of the year.”

The reason for that possible drop-off is easy to see, Bruere says. The presidential election and partisan gridlock in Washington, D.C., has led to a situation where numerous tax issues are undecided, and there are deadlines.

For example, the Bush-era income tax cuts are due to expire at the end of the year. The estate tax is in the same situation.

There is also a question about the capital gains tax and about a tax related to the changes in the health-care law.

With potential sellers concerned they may have to pay a 20 percent capital gains tax rate instead of 15 percent, and with many of them questioning what other tax changes may be coming, there has been a push to sell now.

The logic says if you were seriously considering a land sale, you would make sure it happened before the end of the year, Bruere says.

Of course, when farmers see prices, such as the one nearly topping $21,000 per acre paid recently in Northwest Iowa, it also draws attention.

“That’s an incredibly high price,” says Randy Hertz of Hertz Farm Services in Nevada. “And, usually that’s only possible because of the neighbors.”

The difference between a good sale price and a really high sale price often comes down to whether there are two or three neighbors bidding against each other, Hertz explains.

Sam Kain of Farmers National Co. in Des Moines, agrees, saying there has been a “perfect storm” leading to higher prices for the past several years.

Farmers, especially row-crop producers, have been making very good profits.

Alternative investments have tended to offer poor returns with certificates of deposit often paying a fraction of a percent.

Interest rates have been very low. And, tax rates have been historically low.

The challenge in predicting the future is the tax rates are up in the air right now and may change in a matter of weeks. Also, farmers understand agriculture is cyclical, and they have had a relatively long stretch of high grain prices.

Still, the situation has worked out for Doris Conger and Gene Huston. The brother and sister used to live on one of the tracts being sold today.

“Our parents bought it in 1948,” Huston says.

“I was in high school when we moved. It was an 80 then, and it provided a good living for the four of us.”

Their parents are deceased, and the two siblings decided to sell the land.

“We thought it was a good time to sell,” Huston says.

Today was a good day for a sale. The question some realtors ask is whether it still will be a good time to sell six months from now.

Copyright 2015 Iowa Farmer Today. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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