A Webinar on How Section 1031, 721 and 453 Work for the Sale of Your Farm Assets
A webinar will be available for you to attend on May 13, 2025, at 10 am MT
Most farmers are well aware of a Section 1031 transaction for helping defer income taxes when they sell farmland or other real estate. However, they may not be aware of other income tax code sections that may help them too.
Section 1031 allows for farmers to “sell” their land and then “roll over” the proceeds into additional real estate. It does not need to be farmland, however, as we have discussed in the past, there can be issues with Section 1245 real property such as grain bins, tiling, etc.
The farmer only has 45 days to identify the property and a total of no more than 180 days to finalize the transaction. This defers the gain until that property is finally sold, or the person passes away owning the property and the heirs receive a full step-up in basis under current rules.
A Section 721 exchange allows farm families who have some members that would like to retain ownership in the land and other family members wish to sell out. The land is rolled over into a partnership which hold the property. The family members who want to retain ownership receive units in the entity and those who would like to sell, can sell the units.
This allows family members with different goals to more easily achieve those goals.
A Section 453 transaction allows the farmer to sell their land and only pay tax as they receive proceeds (or has the debt paid off). Farm assets have a unique ability in the income tax code to allow farmers to get cash related to this sale without incurring tax liability until the buyer finally pays them.
This webinar will review all three types of transactions, both the pluses and the minuses. Each of the Code Sections work better for certain farm transactions and the webinar will provide guidance on determining which might be best for you.