The USDA issued a report on Land Values and Cash Rents for January 1, 2008 to January, 1, 2009.  This is a highly detailed report that summarizes the changes in land values and cash rents by region for calendar year 2008.

Some of the highlights are as follows:

•  Average cropland values decreased by 3.9% or $110 per acre to $2,650 per acre.
• In the Cornbelt region, the decrease was 4.0% or $160 per acre to $3,870 per acre.
• In the Northern Plains and Delta regions, cropland values actually increased by 1.6% and .6%, respectively.
• Pasture values decreased by $20 per acre overall, however the Mountain region had a 16% decline in 2008.
• Although cropland values dropped in 2008, they have increased from $1,460 in 2000 to about $2,650 in 2009 or an overall 92% increase.
• In the Cornbelt, Illinois and Iowa still have average cropland values of more than $4,000 per acre.

Some highlights related to cash rents are:

• Annual cash rents rose by $4.50 or 5.3% for the year.
• Pasture rents remained unchanged.
• Cropland cash rents averaged $90 per acre, compared with $85.50 the previous year.
• The Cornbelt region had an average increase of $7 per acre to $146.
• Iowa had the highest Cornbelt average at $180 while Illinois was right behind with $170 per acre.
• California had the highest overall cash rent at $360 per acre and Washington was right behind with $245 per acre.  These were the only two states over $200 per acre.

There is a wealth of information in this report and it would be worth reading it to see how your farm operation compares to your state and region.

My partner Scot and I have a 1031 exchange company that handles many tax-deferred exchanges each year.  About this time of year I like to remind our clients that they may be able to sell their land or real estate for cash, yet defer paying the tax on the sale until 2011.

Here is how it works.

1.  Starting around July 4 or each year, you can sell your land for cash to a buyer.  You enter into a tax defer exchange agreement with a qualified company.  The money from the land sale will be parked at this company.

2.  You have up to 45 days to identify your property.  By this date, make sure to identify at least one or two properties that you would like to buy.

3.  After the 45 day date, you have an additional 135 days to purchase this identified property.  This adds up to a total of 180 days.  If you close the sale after about July 3, this 180 date will be in early 2010.

4.  If you are unable to purchase your replacement property, then the company holding your funds will refund it to you.

Under this scenario, this qualifies for an instalment sale treat.  This means that the case you receive in 2010 will be reported on your 2010 tax return and the tax will be owed either March 1, 2011 or April 15, 2011.

If you had a lot of debt paid off at the time of sale, this may not result in much of a tax reduction since that is considered paid off in 2009.

I will update you over the next several months on other ways to save money with tax deferred exchanges.

The old saying in real estate is that the only three things that matter are location, location, and location. To me, the three things that matter most in succession planning is communicate, communicate, and communicate.

Verbal communication between each of the generations involved is the important first step. What does the generation passing on the farm want to accomplish with the transfer. The generation receiving the farm needs to communicate their desires, goals and wants.  During this back and forth verbal communication ………….

Non-verbal communication needs to be observed and dealt with. Many times, one generation will communicate to the other in words and not realize by the non-verbal communication (facial expressions, posture, etc.) received that what they are communicating is either not being received properly or is being ignored. After all parties have given and dealt with their verbal and non-verbal communication, then ……

Written communication puts it into writing. These documents are generally prepared with the help of appropriate counsel and/or consultants.  However, many times, this is where it ends. To be effective, this written communication needs to be given to each party verbally including the interpretation of non-verbal communication. If all goes well, the plan will be implemented correctly and a good base will be laid to continue the plan for all generations.