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Up to the early 1960's, Federal estate and gift taxes were not large enough to present a major problem for owners of family-size farms. However, the average value of farm production assets increased from $47,500 per farm in 1962 to $102,100 in 1972. The estate tax exemption is $60,000, and an increasing number of heirs to farms are subject to the tax. Since 70 to 90 percent of total farm assets are in the form of fixed assets (land and buildings), heirs of farmers may have a liquidity problem in paying death taxes. While the Internal Revenue Code provides for the extension of payments in liquidity hardship cases, other code provisions create barriers to the use of this privilege. Changes currently mentioned for the Federal estate and gift tax laws include (1) unifying estate and gift taxes into a single transfer tax (gifts are now taxed at a lower rate); (2) taxing the appreciation of capital assets (capital gains) transferred at death; (3) changing the level of exemptions; (4) removing the 50-percent marital deduction; and (5) liberalizing tax payment rules in liquidity hardship cases.


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