The recapture of special use valuation estate tax savings could have income tax implications.

Question

Quizplus · Accepted Answer

When special use valuation is used to reduce estate taxes, there is a recapture provision that could trigger income tax on the recaptured savings. This is because the reduction in estate taxes is essentially a deferral of income tax on the property's appreciation. When the property is later sold or transferred outside the family, the deferred taxes must be paid. This can result in a substantial income tax bill for the heirs or beneficiaries.

The Recapture of Special Use Valuation Estate Tax Savings Could