Recent Blog Posts

By: Robert Moore, Tuesday, April 11th, 2023

Legal Groundwork

Estate tax laws have seen favorable changes over the last 20 years.  In 2000, the federal estate tax exemption was $675,000 and Ohio estate taxes were due for estates exceeding $338,000.  Today, the federal estate tax exemption is $12.92 million and Ohio no longer has estate taxes as they were repealed in 2013.  Therefore, no estate taxes are owed if an individual’s net worth is less than $12.92 million or a married couple’s net worth is less than $25.84 million.  According to data from the USDA, only 0.2% of farm estates, or about 71 estates, were required to pay estate taxes in 2021.  As this data shows, very few farm estate have had to pay estate taxes in the last few years.

On January 1, 2026, the federal estate tax exemption is scheduled to be reduced by 50%.  This tax sunset is a result of the 2018 tax legislation passed by Congress that doubled the federal estate tax exemption for seven years.  The exemption is indexed for inflation each year so there is no way to know exactly what the exemption will be in 2026 but best guesses are that it will be at least $7 million per person.  While a $7 million estate tax exemption will still protect the vast majority of farm estates from having estate tax liability, the number of farm estates subject to estate taxes will increase significantly beginning in 2026.  This increased threat of estate taxes is the result of the 2026 sunset and the significant increase in farmland values in the last few years.  There is no doubt that if things hold as expected, the percentage of farm estates having estate tax liability will be considerably more than 0.2%.

Congress can act and pass legislation to extend the current exemption beyond 2026 or make the current exemption permanent (with inflation adjustments).  If Congress will address the estate tax exemption is anyone’s guess.  Congress will be lobbied by farm groups and small business groups to extend or make permanent the current exemption amounts, but the effect of such efforts is purely speculative at this point.  Perhaps we will have a better idea of Congress’ intentions after the 2024 elections.

In the next post, we will discuss strategies to help reduce the risk of estate taxes for farms should the federal estate tax exemption sunset in 2026.

Posted In: Estate and Transition Planning
Tags: tax exemption
Comments: 0
Farmer working on machinery with Farm On  Farm Financial Management title overlay
By: Peggy Kirk Hall, Friday, April 07th, 2023

We're excited to announce that our new farm financial management online course is now available.  Named "Farm On," the self-paced, on-demand farm financial management course was created by our Farm Office team under the leadership of new Farm Management Field Specialist Eric Richer.  It is offered through OSU Extension’s new Farm Financial Management and Policy Institute.

We created the Farm On course to address the needs of Ohio’s new and beginning farmers who want to better prepare themselves to operate a commercial farm in Ohio and do that with a high level of economic stability while remaining profitable and responsible along the way.  What’s unique about the Farm On course is that, not only does it comply with the regulations of the new Ohio House Bill 95 Beginning Farmer Tax Credit program, it also meets the borrower training requirements for the U.S. Department of Agriculture Farm Service Agency’s Beginning Farmer and Rancher Loan Program.

The 10-module Farm On course includes video lessons, quizzes, and opportunities to apply knowledge gained through graded course exercises. Students can engage with the lead course instructor  through virtual office hours and scheduled appointments. The course covers the following topics:

  • Farm Business Planning
  • Balance Sheets
  • Income Statements
  • Cash Flow Projections
  • Calculating Cost of Production
  • Farm Record Keeping
  • Farm Taxes
  • Farm Financing
  • Risk Management
  • Farm Business Analysis

The Farm On course allows CFAES to serve the needs of all farmers through OSU Extension and our Farm Financial Management and Policy Institute, said Cathann A. Kress, Ohio State vice president for agricultural administration and dean of CFAES. 

“We are excited to partner with ODA and USDA-FSA to address the farm financial training that is required for running a farm business,” Kress said. “Currently, we are the only educational institution in Ohio with a course like ‘Farm On’ that qualifies for ODA’s Beginning Farmer Tax Credit Program and FSA’s Borrower Training Requirements.

“As part of our Land-Grant mission, CFAES educates not just college students but over two million individuals across the lifespan.”

The Ohio House Bill 95 Beginning Farmer Tax Credit program went into effect in July 2022 and grants a 3.99% tax credit to landowners who sell or lease assets to a certified Ohio beginning farmer. The new law also allows an Ohio tax credit to the certified beginning farmer equal to the cost of the financial management course completed. The Farm On course costs $300 per person.

“OSU’s Farm On course is a great way to help Ohio farmers qualify for Ohio Department of Agriculture’s (ODA) new Beginning Farmer Tax Credit program, which is an important tool to help current beginning farmers and potential future farmers do what they do best,” said ODA Director Brian Baldridge. “We are thankful for this partnership that is helping to keep Ohio’s hard-working farmers at the forefront.”

According to Darren Metzger, Ohio Farm Service Agency Loan Chief, “The course is in-depth financial management training that can assist our borrowers to obtain and/or improve their knowledge in this critical area of farm management. OSU’s Farm On course is now 1 of 5 approved vendors for our borrowers in Ohio.”

CFAES’ new Farm Financial Management and Policy Institute was created last year with the goal of sharing resource-based knowledge and best practices to help Ohio farmers manage their businesses as the agricultural industry changes and evolves. Housed within OSU Extension, the goal of FFMPI is for the integration, translation, and communication of CFAES’ farm management and ag policy presence that addresses critical farm management and policy issues affecting Ohioans.

“Farm On is meeting a need of today’s modern crop farmers and it’s packaged in a way that respects the busy schedules of family farmers.  It’s this type of tangible benefit that earns the support of Ohio’s corn and small grains checkoff funds.  We are proud to partner with OSU Extension on this important new institute,” said Tadd Nicholson, executive Director of Ohio Corn and Wheat.

Farm On isn’t just for new and beginning farmers. The course provides an opportunity for any farmer in Ohio, whether you’re a new farmer, a seasoned farmer, a small farmer, or a large farmer.  For a long time, we’ve needed to have this course in Ohio because farm management is so critical to ensuring the future of our farms.

To learn more, view our video and to sign up for Farm On, go to 


By: Peggy Kirk Hall, Wednesday, April 05th, 2023

The United States Supreme Court began its new term last October with the now famous wetlands case of Sackett v. U.S. EPAThe case is one in a long line of legal battles over how to define which waters are “waters of the United States” (“WOTUS”) that are subject to federal jurisdiction under the Clean Water Act.  We expected quiet waters for WOTUS as we awaited the Sackett decision. But we were wrong.

New EPA rule.  The U.S. EPA made a big splash on January 18, when the agency published a new WOTUS rule to define which waters are WOTUS.  Although the rule had been under consideration since the beginning of the Biden administration, many expected the EPA to hold off on finalizing the rule until after the Supreme Court’s Sackett ruling because that decision could affect the rule.  The EPA chose not to wait, and the new rule became effective on March 20, 2023. 

New litigation begins.  Not surprisingly, the new WOTUS rule set off a new wave of litigation.  A string of four federal lawsuits were filed in January and February of 2023 by many states and interest groups.  The cases contest the validity of the rule and ask for preliminary injunctions preventing implementation of the rule while the cases are pending.

Two cases, two different outcomes.  The Southern District of Texas made the first decision on the new litigation in Texas v. U.S. EPA, granting an injunction on March 19 for two of the lawsuits filed by Texas, Idaho, and the American Farm Bureau and other interest groups.  The injunction prevents the rule from going into effect in Texas and Idaho. The federal district court determined the plaintiffs would expend significant resources complying with the rule although the rule was unlikely to withstand judicial scrutiny, creating potential irreparable harm and justifying an injunction against the rule. The Kentucky district court recent an opposite decision on March 31 in the case filed by the State of Kentucky.  The Eastern District court in Kentucky v. U.S. EPA declined to issue Kentucky’s request for a preliminary injunction, concluding that because the EPA has not begun enforcing the rule in Kentucky, there is no impending injury that warrants an injunction.  In both the Kentucky and Texas cases, the courts declined to issue a nationwide injunction against the new WOTUS rule.

Another injunction decision to come. Twenty four states joined together to file West Virginia v. EPA, the fourth federal lawsuit against the new WOTUS rule.  Ohio is not one of the plaintiff states in the case, which challenges the rule and seeks injunctions in the states as well as a nationwide injunction.  We should see a decision on the injunction request soon from the federal district court in North Dakota.

There are waves in Congress, too.  Not satisfied to sit back and watch the battles over the new WOTUS rule,  Congress recently took action to void the rule.  Congress used its authority under the Congressional Review Act, a little-used federal law that allows Congress to invalidate an agency action.  The House passed a resolution to void the rule on March 9 by a margin of 227 to 198, and the Senate voted on March 29 with 53 for and 43 against nullifying the WOTUS rule.  President Biden has the power to veto the legislation, however.  Neither the House nor the Senate appear to hold the two-thirds majority necessary to override a Biden veto.  (UPDATE:  President Biden vetoed the resolution on April 6, 2023).

Back to SCOTUS.  And still, we circle back to the Sackett case and await the Supreme Court’s analysis of the proper test to use to define a “waters of the United States.”  How will the ruling affect the new WOTUS rule and its litigation?  Will Congress act on the Supreme Court’s ruling to establish a statutory definition for WOTUS that would preempt the EPA’s rule?  As we have learned, there are more WOTUS waves yet to come.  


Eminent domain bill page of Ohio General Assembly website
By: Peggy Kirk Hall, Thursday, March 30th, 2023

An eminent domain revisions bill appears to be on hold after its removal from the committee agenda that would have provided the bill a third hearing. House Bill 64 was introduced by sponsors Rep. Darrell Kick (R-Loudonville) and Rep. Rodney Creech (R-W. Alexandria) on February 21.  The bill had two hearings before the House Civil Justice Committee on March 7 and 14, but was removed from the committee’s March 21 meeting agenda. 

House Bill 64 proposes quite a few major changes to Ohio eminent domain law:

  • Voids an appropriation of property if the agency does not follow statutory procedures for the appropriation, such as procedures for appraisal of value, good faith offers of compensation, and negotiation with the landowner.  Under the proposal, a landowner could bring a claim against the agency for violating any of these procedures and the appropriation would be invalid. The proposal is the opposite of current law, which states that procedural violations do not affect the validity of an appropriation of property.
  • Increases an agency’s burden of proof in showing that a taking is for a public use and is necessary, that the agency has authority to appropriate the property, and that the parties are unable to agree on a voluntary purchase of the property. The agency would have to meet the “clear and convincing evidence” burden of proof rather than the “preponderance of evidence” standard stated in current law.
  • Removes two presumptions the law currently makes in favor of an agency.  The first is that an appropriation is necessary if the agency adopts a resolution or ordinance declaring its necessity and the second is that an appropriation for a public utility or common carrier is necessary upon the offering of evidence supporting the necessity.  Removing these presumptions also affects the burden of proof the agency must meet regarding the necessity of a taking.
  • Revises an irrebuttable presumption in current law that an appropriation is necessary if the agency is a common carrier or public utility and a state or federal regulatory authority has approved the appropriation.   The proposal would allow a landowner to rebut this presumption and would limit the presumption only to the specific interests reviewed by the regulatory authority.
  • Prohibits an agency from reducing or revoking the compensation made in an initial offer to a landowner or from later arguing or presenting evidence for a lower amount.  Current law allows an agency to revise an offer if they discover new conditions after making an initial offer.
  • Expands attorney fee, cost, and expense awards for landowners. Current law allows attorney fee and cost awards if an agency challenges a landowner’s appraisal and the final compensation awarded is less than 125% of the agency’s first offer.  The bill would require reasonable attorney fees, expenses, and costs if an agency appeals and does not prevail, in whole or in part.  It also removes a provision requiring a landowner to pay court costs if the landowner denies an agency’s offer and is later awarded less than the offer amount.
  • Awards “coercive damages” to landowners who prove by a preponderance of evidence that an agency used coercive actions during the appropriation process.  Coercive actions include, but are not limited to, advancing the time of a taking, deferring negotiations, deferring the deposit of funds with the court, and attempting to force an agreement on the compensation award.
  • Provides landowners the right to an “inverse condemnation” action, which is a claim that an agency has taken property without filing a court proceeding.  In that case, a landowner may file an inverse condemnation lawsuit in the court of common pleas.  If the landowner proves by a preponderance of evidence that the agency has taken the property, the court can award the landowner compensation and damages for the taking as well as attorney fees, costs, and expenses.  Currently, a landowner must file a “mandamus” action asking the court to order the agency to initiate an eminent domain proceeding and must offer clear and convincing evidence to the court that the agency has taken the property.
  • Extends case timelines.  The bill increases the minimum number of days for the court to set hearing dates.  If a landowner files an answer denying an agency’s authority, the necessity of the taking, or that the parties were unable to agree, the hearing date on those issues would extend from 15 to 30 days after the answer was filed and the compensation hearing date, if the court settles in favor of the agency, would change from at least 60 to at least 90 days after the court settles the issue.  If a landowner could have but failed to file an answer to an eminent domain action, the compensation hearing date would be at least 90 days rather than 20 days from the date the answer was due.  If an owner appeals a court’s determination on authority, necessity, or inability to agree on an appropriation, the bill prohibits the court from setting a compensation hearing until the appeal is final.
  • Removes recreational trails from eminent domain authority.  The proposal states that the use of property for a recreational trail is not a valid “public use” for eminent domain purposes.  Recreational trails, according to the proposal, are trails used for hiking, bicycling, horseback riding, ski touring, canoeing, or other nonmotorized forms of recreational travel. The proposal also excludes the making or repairing of or access management to shared-use paths, bike paths, or recreational trails from the use of eminent domain for making and repairing roads.

In the March 14 committee hearing, the Ohio Farm Bureau Federation testified in support of the bill. Committee members raised questions about the bill’s recreational trail prohibition, initial offer minimum, coercive action awards, and attorney fee awards.  Although the committee chair suggested that a third hearing for opponent testimony would take place in the following week, the bill was later removed from that committee hearing agenda.

Read and follow House Bill 64 on the Ohio General Assembly’s webpage for the bill.

Written by Will Robinson, Graduate Assistant, OSU Agricultural & Resource Law Program

Question mark and magnifier

The Ohio State University’s Farm Office is encouraging participation in a farm legal needs survey. The less than 10-minute survey will help OSU’s Agricultural & Resource Law Program  better shape legal content to target what’s most impactful to agricultural professionals around Ohio.

The OSU Farm Office produces countless bulletins, webinars, and other content meant to help inform farmers and agricultural entrepreneurs on key agricultural and food legal issues. To help us better understand the legal needs of your operation, please take a few moments to fill out this survey:

Thank you for your participation!

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By: Robert Moore, Thursday, March 23rd, 2023

Legal Groundwork

In the final installment of the farm insurance series, we look at unique activities and/or assets that may not be covered by a typical farm policy.  Most farm policies will automatically cover traditional farming activities and assets related to crop and livestock production.  However, many farming operations include assets or activities that may be non-traditional and thus not covered by the farm policy.

Below is a list of farm activities and farm assets that may not be covered by standard farm policies. Each of these activities and assets are a source of liability exposure. Farmers can review this list and identify any asset or activity that may apply to their farming operation.  Then, the list can be provided to their insurance agent to ensure that the farm has full liability protection.  Almost any asset or activity can be covered with the addition of an endorsement to the farm policy. 

  • Agritourism
  • Aircraft application of pesticide/fertilizer (own or custom)
  • Aircraft for personal use
  • ATV/side x side/recreational vehicle
  • Barns and structures that are not currently being used
  • Confined animals
  • Custom application of pesticides or fertilizer
  • Custom farm operations such as planting or harvesting
  • Drones – scouting
  • Drones – application of pesticides/seed
  • Embryos stored or in recipient animal
  • Exotic or non-domesticated animals
  • Farm Markets
  • FFA/4-H Projects
  • Hauling crops, goods or cargo for others
  • Holding products for customers after payment (seed, hay, inputs)
  • Horse boarding, riding or training services
  • Hunting leases or other paid recreational uses
  • Leasing buildings or structures to others
  • Non-owned livestock
  • Off-premises use of ATV/recreational vehicles
  • Oil/gas wells
  • Ponds with docks, diving boards
  • Pick-Your-Own
  • Portable buildings or structures
  • Pulling tractor/truck
  • Purchased feed/seed/inputs purchased but not picked up/delivered
  • Radio or TV Antennas
  • Rental property
  • Rental of grain bins
  • Sale or production of food or other consumable goods
  • Solar panels
  • Swimming pool
  • Tractor shows/parades
  • Tours (paid or unpaid)
  • Using borrowed equipment
  • Using rented equipment
  • Unoccupied houses
  • Valuable refrigerated or frozen products
  • Valuable or important information on computers
  • Watercraft
  • Wind turbines
  • Website or online presence that collects money or stores customer information.
  • Other____________________
  • Other____________________
  • Other____________________
Posted In: Business and Financial
Tags: farm insurance
Comments: 0
Ohio Agritourism Conference title with photo of farm market building and greenhouse
By: Peggy Kirk Hall, Friday, March 17th, 2023

OSU Extension's Ohio Agritourism Conference on April 1 is not an April Fool's Day joke, but it does promise to be fun learning!  If you're thinking about adding or expanding agritourism activities on your farm operation, consider joining us as we learn more about what makes a successful agritourism operation.  We'll visit two popular agritourism operations in southwest Ohio-- Blooms & Berries Farm Market and The Marmalade Lily -- with touring and talks planned at both locations.

Here's the full agenda for the day:

9 a.m. – Registration at Blooms & Berries.

  • Blooms & Berries, an Inside Look.  Jeff and Emily Probst - Owners. Meet the team and take a closer look at how we serve about 100,000 guests a year by staying authentically true to our brand and our team!

Morning breakout sessions, featuring Blooms and Berries Farm Market personnel:

  • Love Your Staff.  Erica Clayton - Retail and Events Personnel Manager.  Learn how Blooms & Berries uses culture to create buy-in and develop an amazing guest experience while easing the burnout.
  • Ag and Operations Show and Tell.  Ben Autry - Ag Production Manager and Derek Rice - Operations Manager. This Q&A session explores the equipment barn, workshop and organizational systems, and specialized equipment.
  • The Market Barn - Shopping is an Attraction Too Emily Probst - Owner.   Emily shares top sellers and guest favorites!
  • The Pie Dough $.  Marie Graves - head baker and Cathy Probst - Owner.  Hear how the team makes and sells 5,000 pies from scratch each year, plus cookies and much more.  

Noon – Lunch at The Marmalade Lily Event Venue and Floral Farm, with an operation overview from owner Laura Fisher.

Afternoon general session

  •  Pouring a New Revenue Stream for Your Operation:  Adding Alcohol to Agritourism – Peggy Hall, OSU Agricultural & Resource Law Program and Jeff Probst, Blooms & Berries Farm Market
  •  Pre-sale Ticketing Trends – Shadi Hayek, Ticket Spice
  •  Minding Your P’s and Q’s – Trademark/Copyright Concerns in Marketing Your Business – Hannah Scott, CFAES Center for Cooperatives
  • Employee Hiring, Training, and Empowerment: People Make Your Business – Rob Leeds, OSU Extension Delaware County
  • Ask Us Anything – Ask that burning question of our experts and your peers

Registration for the conference is $50 and is now open at:



Posted In: Business and Financial
Tags: agritourism
Comments: 0
By: Robert Moore, Thursday, March 16th, 2023

Legal Groundwork

The need for good farm insurance is well known and obvious to everyone in the farm community.  However, understanding how farm insurance works is not as universal.  Farmers know they need insurance and that the premiums must be paid but they may not be familiar with some of the key concepts of an insurance policy.  One such concept is co-insurance.

A farm insurance policy is a contract between the insured and the insurance carrier.  For the policy to be fair to both parties, the insured must provide an accurate inventory of the assets to be covered, including values.  The insurance carrier then uses the inventory of assets and values to calculate the premiums it must charge to carry the insurance. 

A policyholder may be tempted to suppress the values of the assets in an attempt to keep the premiums lower or, perhaps more likely, may not keep up with the replacement value of property.  In either case, whether intentional or not, the insurance carrier is put into an unfair arrangement as it calculates premiums based on undervalued assets.  Consider the following example:

Farmer bought a tractor five years ago for $80,000.  Farmer believes the tractor has declined in value and includes a $60,000 value on his insurance policy.  a similar tractor today would cost $100,000. Farmer’s insurance policy pays replacement value in the event of damage or loss.  The tractor is lost in a fire.  Farmer expects to be paid the replacement value of $100,000. 

In this scenario, Farmer may expect to be paid $100,000 to replace the tractor but he paid premiums based on a $60,000 value.  It would be unfair to make the insurance carrier pay $100,000 in replacement costs when it based its premiums on a $60,000 tractor.

To avoid the scenario in the above example, farm insurance policies include a co-insurance provision.  This concept is an agreement between the insured and the insurance carrier that a minimum amount of insurance must be purchased to replace property in the event of a loss.  If the policyholder purchases less than the specified percentage, the insurance carrier is not required to payout the full replacement value – making the policy holder a “co-insurer”.  The insurance policy usually requires the insured to purchase insurance on 80% - 100% of the value of property.  Co-insurance generally applies to outbuildings, dwellings, and blanket farm personal property.  Consider the following example:

Using the same example as above, Farmer’s co-insurance provision requires 80% coverage.  The tractor was only valued at 60% of the replacement value so the co-insurance provision in Farmer’s insurance policy is triggered.

The payout calculation for this loss is as follows:

                        Tractor Replacement Value =                        $100,000

                        Co-insurance requirement =                           80%

                        Required amount of insurance =                    $80,000 ($100,000 x 80%)

                        Actual amount of insurance purchased =       $60,000

                        Actual insurance/ required insurance =          75% ($60,000/$80,000)

                        Required payout1 =                                        $75,000 (75% x $100,000)

As this example illustrates, Farmer did not meet his obligation to buy insurance on at least 80% of the value of the tractor.  Farmer reported a value of $60,000 or 75% of the value of the tractor.  By not meeting the 80% co-insurance requirement, Farmer triggered the co-insurance provision and is therefore partly responsible for the replacement cost.   Farmer becomes the co-insured for 25% of the replacement value, the proportion that Farmer undervalued the combine.  If Farmer had valued the tractor at $80,000 or higher, the insurance carrier would have been required to payout the full $100,000 for the loss.  By inadvertently undervaluing the combine, Farmer forfeited $25,000 of insurance payout.

Co-insurance is an important part of a farm policy insurance that most people have never heard of. The co-insurance provision should be reviewed with the insurance agent along with the value of assets to ensure that full payouts will occur in the event of a loss.  It does no good to discover that assets are valued too low after a claim is submitted, any adjustments in value to comply with the co-insurance requirement must be done before there is a loss.

1 Any deductible would also be deducted from the payout.

Posted In: Business and Financial
Tags: farm insurance
Comments: 0
Farm Office team members on webinar screen
By: Peggy Kirk Hall, Tuesday, March 14th, 2023

It's almost as fun as basketball!  Join the OSU Extension Farm Office team for the March Madness Edition of Farm Office Live on Friday, March 17 from 10:00 to 11:30 a.m. This monthly webinar delivers the latest on current farm management and agricultural law issues for Ohio farmers and agribusiness professionals.

Here's what we'll be covering:

  • Legislative Update (Peggy Hall)
  • New Postnuptial Agreement Legislation (Robert Moore)
  • Selling Timber--Call Before You Cut (Dave Apsley)
  • Update on Crop Input Costs and Crop Budget Outlook for 2023 (Barry Ward)
  • Sales Tax Exemption Issues (Jeff Lewis)
  • Spring Crop Insurance Update (Eric Richer)
  • Emergency Relief Program (David Marrison)

There is no fee to attend Farm Office Live, but attendees need to register at  We hope to see you there!

Posted In: Business and Financial
Tags: Farm Office Live
Comments: 0
By: Robert Moore, Friday, March 10th, 2023

Legal Groundwork

Cell tower leases can be a great source of income for landowners.  The towers have a relatively small footprint on the land and can provide monthly income of $1,000 or more.  Additionally, and in some cases most importantly, having a cell tower can increase cell service quality and dependability.

Many landowners are eventually contacted by the cell tower company or another third-party company to purchase the lease rights.  The purchasing company offers a large, one-time payment to buy out the lease rather than continuing to receive monthly payments.  This buyout presents the landowner with an opportunity to generate a large, one-time payment rather than waiting on the monthly payments.  The issue for the landowner is whether the one-time payment is large enough to give up the future stream of payments.

When deciding if the one-time payment is enough to relinquish the monthly payments, the first course of action is to determine the Present Value of the lease.  Present Value calculates the current value of a future stream of income.  There are calculators available online to easily calculate the Present Value.  The offered payment should be something close to the Present Value.

Another factor to consider when analyzing the payment structure is the number of carriers on the tower.  Some cell tower leases pay additional rent when carriers are added to the tower.  Thus, the value of the lease many not be limited to just the Future Value of the current income stream but also the potential for increased revenue due to additional carriers added to the cell tower.  For leases with the opportunity to increase revenue with the addition of new carriers, this additional value should be factored into the one-time payment analysis.

Like most business transactions, taxes are an important factor in analyzing the favorability of the deal.  Cell lease buyouts are no different.  The buyout payment will likely be considered a capital gain.  Therefore, the gain will likely be taxed as capital gains rate rather than ordinary income.  Capital gains tax rates tend to be lower than ordinary income tax rates.

Taking the one-time payment has advantages.  The first, and most obvious advantage, is it creates a much larger and immediate payment than the monthly payments.  Additionally, the buy-out payment can usually be used in a like-kind exchange.  That is, if the sale proceeds are invested into other business real estate, the capital gains tax is deferred.  Lastly, the one-time payment is a guaranteed payment for a certain amount.  There is not the same certainty with the lease payments.  Cell leases typically allow the cell company to terminate the lease at any time.

The obvious disadvantage of taking the one-time payment is the loss of the monthly payments.  The payments are a nice supplemental income and are a dependable source of income.  Additionally, taking the one-time payment could cause the landowner to be pushed into the higher, 20% capital gains tax rate.

For those landowners who have cell leases and receive an offer to buy out the lease, seeking tax and legal advice is a good idea.  An accountant and/or attorney can provide valuable guidance and insight into analyzing the advantages and disadvantages of having the lease bought out. Working with an attorney who has experience with cell tower leases can have significant benefits.  The attorney can help advise as to how much the buyout payment should be, help negotiate better terms and, also help reinvest those funds into other real estate to defer capital gains.



Posted In: Business and Financial
Comments: 0