Tuesday, April 22, 1997

An inside look at death tax impact on family operations

Last week, this farm writer told you about efforts by the Texas and Southwestern Cattle Raisers to show lawmakers that federal death taxes make the transfer of family-owned ranches and farms to the next generation almost impossible.

There's no better Hereford cattle operation in America than Dudley Bros. Herefords of Comanche. And no better example of a true family operation.

But when John Dudley testified in Washington, D.C., before the U.S. Senate Finance Committee this month, he made it clear that it's been an incredible struggle just to pay death taxes and attempt to hold the operation together.

The TSCRA second vice president told the committee that the death tax is a disincentive to economic success.

Dudley also is a director of the National Cattlemen's Beef Association (NCBA).

Both the NCBA and TSCRA favor a complete repeal of the death tax or reform through lower rates, increased exemptions, and indexing estate valuations over time with inflation.

A very personal and sad struggle

John knows what he's talking about when he addresses death taxes.

He relayed the Dudleys' personal story of two family deaths and his family's intense struggle to pay the death tax debts over a total of 25 yers.

The Dudley family ranch is a limited partnership. His immediate family - as well as uncles, aunts, and cousins - works together to run the cattle, horse, and farming operation.

"The death tax drained the available cash out of the family business," Dudley testified. "Any money tht could have been spent on conservation efforts, brush control, water development, fence repair, and wildlife management has been spent to pay death taxes. We leased our land and endured outside hunters in order to make tax payments."

Three of the original partners of the Dudley family ranch are still living, and each one is over 80 years old.

"We will not be able to service the tax debt from three deaths without a sale of property," Dudley said. "It will destroy the viability of our family's operation."

In A TSCRA's "Death and Capital Gains Tax Survey," to the Senate Finance Committee, a whopping 66 percent of the respondents said the death tax would affect the future of their business. Some 74 percent favored a repeal of the death ta.

Dudley also stressed the linkage between death and capital gains taxes.

"Some families are forced to sell assets to pay their loved ones' death taxes," Dudley noted. "They sell the asset and give one-third of the value of the asset to the federal government for capital gains taxes in order to provide another check to the federal government for the death tax debt."

TSCRA is a 120-year-old livestock and trade association representing more than 14,000 cattle raisers who own or control 1.8 million head of cattle on millions of acres of ranch and pastureland in Texas and Oklahoma.

For more, write: TSCRA, 1301 W. Seventh St., Fort Worth, Texas 76101-2665, or call (817) 332-7064, or FAX, (817) 332-8523.