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Farm rental from father to son
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Hoosierheartland
Posted 9/26/2020 05:41 (#8515575)
Subject: Farm rental from father to son


I am the son in the particular situation. Small family farm. Around 400 acres all but 75 is owned by dad. We both have off farm income, dad just recently retired. I have worked for my “inheritance” on the farm, and have never drawn a check. I have a family of 4 and my wife enjoys helping and is excited about the potential for us to run the business as well. The long and short of it is dad is semi-ready to be done, and after realizing the tax implications of making a profit on the farm, anything he stands to make until age 67 (he’s 62) will be garnished at a 50% up to a certain dollar amount as you all are probably familiar with social security. I have been ready for a little while for this and I think dad realized this and were taking the first steps in that direction. A couple questions that have come up that i guess id appreciate some general advice on.

He’s going to set a very fair rent, but it will be a triple net lease style where I’m responsible for taxes and insurance. To me this seems like a good way of going about it, anyone who has done this, are there any negatives?

He’s planning on gifting me the equipment. All the equipment is 100% owned and paid for. Probably 300k in equity there. My plan was to borrow against this equity as collateral for a line of credit, as that’s what dad does now. Dad and I had talked to the bank previously and they had said his current line of credit could be put in my name, with the transfer of collateral in equipment and I slowly start getting his working capital back to him, our cpa didn’t think that was a terrible idea, and suggested possibly setting up a lease/buyout schedule for the farm equipment that would essentially be me repaying him his working capital. What have you guys done in your particular situation? I think I prefer a clean start myself, but I can see the advantages.

He’s still uneasy about the whole situation, and I completely understand. One of his biggest fears is that they are hit with a major medical bill, or something of that nature, and no longer have the financial flexibility that having access to a revolving line of credit provides. In my eyes other than assure him that I will do anything I can do to help, there’s nothing I can really say or do.

Any general advice would be appreciated. A lot of moving parts in a deal like this.
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