Archive for May 26th, 2009

If the property is disposed of within ten years after the death of the decedent to nonfamily members or ceases to be used for farming or other closely-held business purposes, the tax benefits are fully or partially recaptured.
1. Full recapture occurs within the first ten years.
2. Recapture does not occur, however, on death of the qualified heir.
3. Partial dispositions lead to partial recapture of the tax savings.
4. The qualified heirs are responsible for the recaptured tax.
5. For purposes of “cessation of qualified use,” absence of material participation for three or more years during any eight-year period ending after decedent’s death triggers recapture.
6. A special lien, in favor of the United States, will be attached to the property. Liens on loans by the Treasury will be subordinate to bank loans.
7. A two year grace period after the decedent’s death during which a qualified heir’s failure to use the qualifying property in the qualified use will not cause imposition of a recapture tax.
8. Active management by eligible qualified heirs will satisfy the post-death material participation requirement. Eligible heirs in this case include the decedent’s spouse, or a qualified heir who has not attained age 21, who is a student or is disabled.