- 23 -
This average rent amount is then divided by a capitalization
factor based on the average annual effective interest rate for
all new Federal Land Bank loans. The average annual computation
is performed on the basis of the 5 most recent calendar years
ending before the date of the decedent's death. See sec.
2032A(e)(7)(A); sec. 20.2032A-4(a), Estate Tax Regs.
The annual gross cash rental is the amount of cash rental of
actual tracts of comparable farmland in the same locality, not
reduced by any expenses or liabilities associated with the farm.
See sec. 20.2032A-4(b)(1), Estate Tax Regs. The executor is
required to identify actual comparable property and the cash
rentals from the comparable property for all of a decedent's
property that is specially valued. See Estate of Strickland v.
Commissioner, 92 T.C. 16, 24 (1989). The regulations require
that the executor be able to substantiate the valuation with
supporting documentation, including identification of comparable
property and cash rentals from that property. See sec. 20.2032A-
4(b)(2)(i), Estate Tax Regs.
Section 2032A(e)(7) provides that the value of a farm for
farming purposes shall be determined by the formula method of
valuation unless: (1) It is established that there is no
comparable land from which the average annual gross cash rental
or average net share rental can be determined; or (2) the
executor elects to have the value of the farm determined under
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011