What is a 2032A?

A 2032A is used to save money on taxes when valuing farmland, by establishing its value significantly below market value.

This form of valuation is used often with the ownership of family farms which will pass to another member of the family.

What qualifies for a 2032A?

The farm must have been owned by the same person for eight years and the property must be transferring to a family member of the current owner. The new owner must also own the property for ten years and use the property for the same purposes as the prior owner.

Example:

For example, you could benefit from a 2032A value if your grandfather owned the family farm for twenty years and decided to pass it along to you as a grandchild. To comply with the valuation of a 2032A you must own the property for the following ten years and continue to use the land as farmland as your grandfather used it.

How the is Value Calculated:

The valuation is calculated based upon comparison of other farmland cash rent prices in the same vicinity, then annual state and local real-estate taxes are deducted, and that net income is then divided by the average annual effective interest rate of all new Federal Land Bank loans.

Potential Drawback:

The difference between the actual market value and the 2032A value is what can be recaptured in a lien by the IRS, if conditions are not met.

2032A values can be a bit confusing and not entirely beneficial in the long run for the acquiring parties, because of the many factors involved.

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