Tax Exchange Question

I was recently invited to speak at the Brock Associates 2005 Agricultural Economic Symposium in Destin, FL. What a high-powered group of individuals attending from nearly 15 states!

A woman asked me an intriguing question. Their farm operation is being bought out for a road expansion, and she was interested in my advice concerning reinvestment. She further stated that she could exchange one acre for six acres because of the high value.

First, she and her husband must sit down, re-evaluate their goals and objectives and examine their financial situation. She and her husband appeared to be in their mid 50s. My suggestion was to take a little less aggressive land investment, perhaps four acres rather than six, take some cash for liquidity, and pay some taxes. At their age and with the current real estate bubble, a little cash and liquidity might be necessary in the years to come. She might want to explore other tax deferred vehicles and health and medical accounts for a strategy in later life.

At this conference, many of the trusted producers I have known over the years indicated that smart money, i.e. long time real estate investors, are now sitting on the sideline on new purchases in some regions of the country. Is this a sign of coming events? Only time will tell!

Side note
It was great to visit with my office mate from graduate school at Cornell, Rick Brock and his wife. In graduate school I knew Rick had the energy and drive that would make him a success in whatever he ventured into. If any of you get an opportunity to attend this conference, it is well worth it.

My e-mail address is:sullylab@vt.edu

Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.

To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.

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