HIGHEST AND BEST USE
Property in a decedents estate is valued for estate tax purposes by the
"willing buyer-willing seller test". In the world of commerce, property
generally changes hands for a price determined by agreement between a knowledgeable
seller and a knowledgeable buyer. For purposes of this Report, this valuation
concept relates to property which is not restricted as to its use. The buyer
is not limited to the sellers previous use of the property.
The buyer may have a more profitable use for the property than
the seller. This more profitable use is called the "highest and best use."
APPLICATION OF THE "HIGHEST AND BEST USE"
TO THE FAMILY FARM
AND OTHER BUSINESS REAL PROPERTY
Real property is unique because the same acreage or parcel may be used for different
economic purposes. Perhaps nowhere is this more true than with a Family Farm.
However, this concept is also true with respect to other real estate used in a
family business.
We need to discuss "value" for a moment. To a disinterested person,
the value of an acre of real estate is the highest price for which that person
could later sell the acre. There is no concern in a pure profit analysis, over
the future use of the property by the new buyer. How does this disinterested
persons actions affect the Family Farm or other closely held business
real property?
Learn more about special valuation benefits for farms and other real property by clicking the link below. The rest of the Report discusses the following:
- "Highest and Best Use": Meets the Estate
Tax
- "The Tax Man Cometh"
- Internal Revenue Code Section 2032A - Estate Tax Relief
for the Family Farm
- The Technical Requirements
- Planning for Spouses
