First-time farm owners and family ranchers sometimes wonder how to sell a ranch to gain the most from their property. The financial details can be complex to someone unfamiliar with the process. When you put up a Colorado ranch for sale, here are some key steps to take:
Determine Important Ownership Details
The owner is identified on the deed. Issues that may arise include parents being the owners instead of heirs. Resolve any ownership issues first to avoid more expensive troubles later.
Get a Property Appraisal
Here is where, if you try to sell a ranch yourself, you may run into trouble. An agricultural real estate appraiser should assess key aspects of the property, including water and irrigation, crop yields, climate, and soil conditions, as well as easements and zoning restrictions.
Talk to Your CPA
Your financial advisor should provide insights into tax implications. Taxation on farmland is more complex than on typical residential property. Depending on your assets, the tax rates may vary and be broken down based on land, equipment, structures on your property, and livestock.
Taxes that may apply when selling a ranch or farm, according to Land.com, may include:
- Federal Ordinary Income Tax
- Federal Capital Gain Taxes
- Depreciation Recapture
- State Taxes
- Medicare Surtax
In Colorado, the state tax rate is 7 to 9%.1 Other tax considerations include:
- IRC Section 1031 Tax-Deferred Exchange: A taxpayer can sell their property, and purchase another without incurring a capital gain tax. In some cases, a landowner can sell their old property and purchase a larger plot of land while deferring capital gains taxes in the process.
- IRC Section 664 Charitable Remainder Trust: Also called a capital gains avoidance trust, it avoids capital gains tax on the sale altogether or taxation on the sale of livestock, machinery, and equipment. It can be used in combination with a 1031 exchange for additional savings.
If your ranch is owned inside a business entity (i.e., an LLC, partnership, S Corporation, or C Corporation) or there are multiple separately deeded parcels, this can affect taxation as well.
Compare Your Ranch to Recent Sales
A real estate professional can help factor in characteristics such as cultivatable, pasture, and timber acres as well as irrigation and the size, depth, and pumping capacity of wells. Drainage, property improvements, recreational uses, and other issues need to be considered as well.
Work with the Right Professionals
There’s no effective way to sell a farm yourself unless you specialize in many fields. If you want to know how to sell your land properly, you’ll need an attorney and team of real estate, investment, estate planning, and financial advisors. Next, you’ll need to list your property, but only sign the listing agreement if you’re comfortable with its terms.
Last, find the best place to advertise your property. For example, M4 Ranch Group is a leading website to list a Colorado ranch for sale. Learn more about our buyer and seller services and listings by browsing our site or contact us directly at 970-944-4444.