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Friday, May 3, 2024
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Case Studies |
Rodeo Rider Tax-Free Lifestyle or "No Tax Will I Ever Pay"
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Case:
Mac Swenson loved the great outdoors. He grew up in the Big Sky country of Montana. As soon as he could walk, Mac was on a pony. By his teen years, Mac was riding horses every day. On weekends he watched with admiration as the older cowboys practiced riding bucking broncos at the local rodeo grounds.
By age twenty, Mac was riding the rodeo circuit. He soon moved up to the most exciting event at the rodeo, bareback riding on the wild and powerful Brahma bulls. Mac was lean and tough and soon gained a national reputation as a skilled and fearless Brahma bull rider. At a rodeo in Burwell, Nebraska, Mac watched with great interest as a lovely and charming young lady named Glenda Olson was crowned the rodeo queen. Mac was head over heels in love. They soon married and he used the rest of his rodeo winnings to buy a small ranch near the Beartooth Mountains in Montana. Over the years, Mac and Glenda raised four children and steadily built up the ranch. Both loved the great Big Sky country and planned to spend the rest of their days watching the sun set over the Beartooth Mountains.
Question:
When Mac and Glenda reached their sunset years, the ranch was more than 12,000 acres. One day Glenda said, "Mac, we love the ranch and would like it to always be ranchland. You know, over in the Big Sky valley they are taking ranches, splitting them up and selling to out-of-state people for second homes. I would hate to see our ranch developed. Is there a way we can keep the ranch just as it is now?"
Solution:
Mac responded, "They will divide this ranch for homes over my cold dead body! I will call our CPA Willie Wilson and check this out tomorrow."
Mac contacted Willie and learned some very good news. The right to build homes on the land could be restricted by giving a conservation easement to a qualified Montana land conservation charity. The charity would need to sign an agreement showing that it had the ability and intent to enforce the restriction, which was exactly the desire of Mac and Glenda. But the best news is that since Mac and Glenda receive over 50% of their income from ranching, they qualify for a charitable deduction usable to 100% of income with a carry-forward for 15 years!
Willie obtained an appraisal from an independent firm that was certified and regularly did ranch real estate appraisals. He had the agreement signed by the Montana conservation charity, and submitted both the agreement and the appraisal with a completed Form 8283 with their tax return.
With the charitable deduction for the conservation easement, Mac and Glenda will not pay federal income taxes for twelve to fifteen years. Mac was delighted. He saddled his favorite horse Buttermilk and rode off into the sunset smiling and singing his favorite song:
Home On The (Tax-Free) Range
"O give me a home,
Where the buffalo roam,
And the deer and the antelope play,
Where never is heard,
A discouraging word,
Because no tax will I ever pay.
Ooooooooooh - NO TAX WILL I EVER PAY!"
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