The Valuation of Farmland in Nebraskaby Frank Heinisch, Christin Lovegrove on 04/17/15
This was taken from an April 15, 2015, email Frank sent to the NSBA Real Estate, Trust and Probate Section list serve.
County assessed value as discounted to 75% is a starting point in valuation but does not often reflect FMV of Nebraska agricultural land. Review the University of Nebraska Agricultural Economics Publication, Nebraska Farm Real Estate Market Highlights 2013-2014 published June 2014, http://agecon.unl.edu/2015-trends-in-nebraska-farmland-values-and-rental-rates and the updated valuations as of February 1, 2015, http://agecon.unl.edu/2015-trends-in-nebraska-farmland-values-and-rental-rates.
For Nebraska Real Estate Transfer Statement form 521 line 14 “What is the current market value of the real property,” the county assessed value is generally accepted. Computation of life estates for form 521 the county assessed value is also generally accepted.
For the clear market value for inheritance tax, at a minimum use the county assessed value. Often a higher value, reflecting FMV is appropriate to take advantage of stepped up basis. Federal estate tax and gift tax requires FMV that is generally higher than the assessed value of farm ground. In Fillmore County the pivot irrigated land is about 160% of the 2014 county assessed value.
We often use county assessed values for houses and improvements and value the farm land at average sales rates representative of the UNL reports. There are IRS restrictions on using averages for valuation rather than actual sales, but the average will generally reflect a FMV in the ball park of what is acceptable and the level of error in FMV is insignificant in many estates. The next step is to hire an appraiser for larger estates involving taxable federal estate tax or recite actual comparable sales as the basis for determining FMV.