Farm or Fortune? The Role of Heirs’ Intentions and Tax Policies in Farmland Succession Planning
Agricultural & Applied Economics Association Annual Meeting Invited Paper, 2025
Abstract
Capital gains taxation has been identified as a possible cause of limited sales transactions in farmland markets. This paper analyzes the impacts of capital gains and estate taxation on the optimal holding behavior of farmland owners. Using the Iowa Farmland Ownership and Tenure Survey (IFOTS), representative agents are derived for the nine agricultural districts in Iowa and their optimal land holding/selling behavior is simulated through four policy scenarios: current policy as a result of the 2017 Tax Cuts and Jobs Act, the possible sunsetting of the 2017 Tax Cuts and Jobs Act, H.R.1- One Big Beautiful Bill Act (2025), and the proposed 2022 American Families Plan. The results show regional heterogeneity in the sensitivity of agents to changes in capital gains and estate tax policies that depends on the heir’s intent to keep or sell the farm.
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