At the time of enactment of special use valuation in 1976,1 no mention was made of the possibility of sharp and persistent increases in farmland values or sharp drops in interest rates. Both have occurred (and continue to occur) with the result that special use valuation offers unusually generous discounts within the statutory limits in terms of maximum reduction of the gross estate. The economic environment has also created unusually large potential income tax liabilities on sale of special use valued farmland which was purchased from the estate because of the relatively low income tax basis in estates recently electing special use valuation. Both deserve careful planning attention.



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