Most meetings and discussions Farmers First Trust has with farmers and their CPAs will contain the question, “Will MDPT work with ‘C’ corps or ‘S’ Corps?” The short answer is yes, it does work with ‘C’ corps and ‘S’ Corps. The key requirement is that the asset sold is farmland or farm commodities as MDPT can only be applied in U.S. agriculture.
Today's farms that are structured as ‘C’ and ‘S’ Corps typically are owned by family members each with differing ownership shares. Sometimes the family ownership is from multi generations of the farm family creating potentially differing views of the looming capital gains taxes.
The important aspect of these two incorporation structures is the tax liability for each of the shareholders and how deferring taxes, using MDPT, affects each of these shareholders. The CPA for the corporation is a critical member to deliver the tax analysis for each of the shareholder. Farmers First Trust requires that the CPA’s involvement in the utilization of MDPT occurs early in the discussion process.
The history, development and utilization of the monetized installment sale that provides the tax law supporting MDPT can be found in a Creighton University Law Review article. The article is titled, “INTERNAL REVENUE CODE SECTION 453: “MONETIZING” THE TAX DEFERRED INSTALLMENT SALE OF FARMLAND AND FARM COMMODITIES” (Creighton Law Review. vol. 52, no. 2, pg. 153-168, March 2019) by DARREN R. CARLSON, J.D. of the Law Firm Carlson & Burnett in Omaha, Nebraska.
The Creighton Law Review article provides excellent information for your CPA and yourself as you prepare to sell farmland or farm commodities.