Gifting Strategies

Additional Strategies for Business Owners

Special use valuation of farms or real property used in a closely held business

For estate tax purposes land is required to be valued at the fair market value (FMV) of its highest or best use.  In some situations, farm land or land used in a closely-held business is overvalued for estate tax purposes due to its location in an area which is presently, or in the near future may be, utilized for suburban-type residential development, or for commercial/industrial development. Recognizing that such real estate may continue to be used as a farm or in a closely-held business which may not be its highest and best use, Congress enacted legislation which permits an executor to elect to have qualifying farm property or qualifying land used in a closely held business valued for estate tax purposes on the basis of its special use(i.e. as farm land, or as land used in a closely-held business.) This special use valuation cannot be more than $900,000 less (in 2006) than the FMV of the property's highest and best use.  In order to take advantage of this special-use evaluation, there are certain restrictions on the sale or use of the property, which may cause the re-evaluation of the property if such restrictions are violated.

Consult an estate planning professional when considering the use of these planning tools.