President Biden has said his tax proposals would make big business and wealthy investors pay their fair share.
His package would also likely deliver a blow to American farm owners by limiting a longstanding tax break. The provision allows landowners to defer paying capital-gains tax when they sell investment property and put the proceeds toward the purchase of other real estate.
Farmers for generations have used the tax break to cheaply and quickly relocate farm operations to lands with better soil, diversify the crops they grow and consolidate land holdings. Some have used it when exiting the farming business at retirement. Farm owners in 2012 held 915 million acres, about 40% of the land in the continental U.S.
Farmers were hit four years ago when the Trump administration narrowed the use of this tax deferment, known as a 1031 like-kind exchange. The provision, named for a section of the tax code, used to apply to many types of personal property, including farm equipment and livestock. Farmers exchanged their old tractors and upgraded to newer and better ones without having to pay tax on their trade-ins.
The 2017 tax law under President Trump eliminated 1031 exchanges for everything but real estate.
