Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return Page 13
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55predeceased spouse to the period of
in the same locality as the qualified real
operation. For this purpose, produce
active management by the surviving
property as determined by generally
includes livestock.
spouse to determine if the surviving
accepted real property valuation rules.
The gross value of the produce is
spouse's estate qualifies for special-use
The determination of comparability is
generally the gross amount received if
valuation. To qualify for this, the
based on a number of factors, none of
the produce was disposed of in an
property must have been eligible for
which carries more weight than the
arm's-length transaction within the
special-use valuation in the
others. It is often necessary to value
period established by the Department of
predeceased spouse's estate, though it
land in segments where there are
Agriculture for its price support program.
does not have to have been elected by
different uses or land characteristics
Otherwise, the value is the weighted
that estate.
included in the specially valued land.
average price for which the produce
For additional details regarding
The following list contains some of
sold on the closest national or regional
material participation, see Regulations
the factors considered in determining
commodities market. The value is
section 20.2032A-3(e).
comparability.
figured for the date or dates on which
Similarity of soil;
the lessor received (or constructively
Whether the crops grown would
received) the produce.
Valuation Methods
deplete the soil in a similar manner;
Valuing a real property interest in
The primary method of valuing
Types of soil conservation techniques
closely held business. Use this
special-use property that is used for
that have been practiced on the two
method to determine the special-use
farming purposes is the annual gross
properties;
valuation for qualifying real property
cash rental method. If comparable gross
Whether the two properties are
used in a trade or business other than
cash rentals are not available, you can
subject to flooding;
farming. You also may use this method
substitute comparable average annual
Slope of the land;
for qualifying farm property if there is no
net share rentals. If neither of these is
For livestock operations, the carrying
comparable land or if you elect to use it.
available, or if you so elect, you can use
capacity of the land;
Under this method, the following factors
the method for valuing real property in a
For timbered land, whether the timber
are considered:
closely-held business.
is comparable;
The capitalization of income that the
Whether the property as a whole is
Average annual gross cash rental.
property can be expected to yield for
unified or segmented. If segmented, the
Generally, the special-use value of
farming or for closely held business
availability of the means necessary for
property that is used for farming
purposes over a reasonable period of
movement among the different sections;
purposes is determined as follows.
time with prudent management and
Number, types, and conditions of all
1. Subtract the average annual state
traditional cropping patterns for the
buildings and other fixed improvements
and local real estate taxes on actual
area, taking into account soil capacity,
located on the properties and their
tracts of comparable real property from
terrain configuration, and similar factors;
location as it affects efficient
the average annual gross cash rental for
The capitalization of the fair rental
management, use, and value of the
that same comparable property, and
value of the land for farming or for
property; and
closely held business purposes;
2. Divide the result in (1) by the
Availability and type of transportation
The assessed land values in a state
average annual effective interest rate
facilities in terms of costs and of
that provides a differential or use value
charged for all new Federal Land Bank
proximity of the properties to local
assessment law for farmland or closely
loans. See Effective interest rate, later.
markets.
held business;
The computation of each average
You must specifically identify on the
Comparable sales of other farm or
annual amount is based on the 5 most
return the property being used as
closely-held business land in the same
recent calendar years ending before the
comparable property. Use the type of
geographical area far enough removed
date of the decedent's death.
descriptions used to list real property on
from a metropolitan or resort area so
Schedule A.
that nonagricultural use is not a
Gross cash rental. Generally,
significant factor in the sales price; and
gross cash rental is the total amount of
Effective interest rate. See Tables
Any other factor that fairly values the
cash received in a calendar year for the
1 and 2 of Rev. Rul. 2017–16, 2017–35
farm or closely held business value of
use of actual tracts of comparable farm
I.R.B. 215, available at
Rev, Rul.
the property.
real property in the same locality as the
2017–16, for the average annual
property being specially valued. You
effective interest rates in effect for 2017.
Making the Election
may not use:
Net share rental. You may use
Appraisals or other statements
Include the words “Section 2032A
average annual net share rental from
regarding rental value or areawide
valuation” in the “Description” column of
comparable land only if there is no
averages of rentals, or
any Form 706 schedule if section 2032A
comparable land from which average
Rents paid wholly or partly in-kind, or
property is included in the decedent's
annual gross cash rental can be
Property for which the amount of rent
gross estate.
determined. Net share rental is the
is based on production.
difference between the gross value of
The rental must have resulted from an
An election under section 2032A
produce received by the lessor from the
arm's-length transaction and the amount
need not include all the property in an
comparable land and the cash operating
of rent may not be reduced by the
estate that is eligible for special-use
expenses (other than real estate taxes)
amount of any expenses or liabilities
valuation, but sufficient property to
of growing the produce that, under the
associated with the farm operation or
satisfy the threshold requirements of
lease, are paid by the lessor. The
the lease.
section 2032A(b)(1)(B) must be
production of the produce must be the
specially valued under the election.
Comparable property.
business purpose of the farming
Comparable property must be situated
Part Instructions
-13-
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