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An index of farmland values using “ag land including buildings asset value per acre” data from USDA-NASS can be used to estimate farmland value for a given year using a known value for farmland from another year (Table 1). Consequently, if the value of farmland is known in any year, a value can be estimated for any other year since 1910 with the farmland value index. In addition, these indexes may be used to estimate step-up basis so that landowners and their advisors can estimate potential tax liability in their respective location. 

 

Table 1: USDA Index of Oklahoma Farmland Values

 

Although the index content maybe useful for estimating Oklahoma farmland to another point of time, this estimate provides only one piece of information useful in decision making.  Estimated farmland values do not substitute for land appraisals or comparative sales, and may deviate from true market value for any number of reasons including land improvements, buildings and facilities, pressure from development and other urban influences, mineral rights, and previous farm production management practices. It is recommended that tax professionals and/or certified real estate appraisers be consulted.

 

Farmland values for a past year can be estimated using the following formula and is useful, for example, to estimate the change in value since inheritance.

 

Farmland value from past year = Current farmland value * (Index value for past year / Index value from current year)

 

Example 1: Oklahoma farmland was inherited in 1975 with no appraisal at that time. In 2022, the heir considered selling the land and had it appraised at $2,000 per acre. What was the appreciated value since 1975? Using the table, the index values for 1975 and 2022 are 41.66 and 310.34, respectively.

 

Estimated 1975 farmland value = $2,000 * (41.66 / 310.34)

 

The estimated value of the farmland in 1975 is $268 per acre. The taxable value is the difference in land value since 1975, so the $268 is subtracted from $2,000 for an appreciation of $1,732 per acre. This would be the value potential tax liability will be based on instead of the $2,000 per acre current value.

 

Current farmland values can also be estimated using past values with the following formula:

 

Current farmland value = Farmland value from past year * (Index value for current year / Index value from past year)

 

Example 2: You paid $495 per acre for land in 1987. What is the estimated value of this land today? Using the table, the index value for 1987 and 2022 are 65.52 and 310.34, respectively.

 

Estimated 2022 farmland value = $495 * (310.34/65.52)

 

The estimated value of the farmland in 2022 is $2,345 per acre.

 

References:

Griffin, T. and Lashmet, T., “Estimating Tax Liability Using Stepped‐Up Basis”, Kansas State University Department Of Agricultural Economics Extension Publication, 2017.


https://agmanager.info/finance-business-planning/financial-management/estimating-tax-liability-using-stepped-basis

 

USDA NASS. QuickStats. 
http://www.nass.usda.gov/Quick_Stats/

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