IRC §2032A Special-Use Valuation

Posted on March 28, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Understanding Physician Estate Planning

By Lawrence E. Howes; CFP™
By Joel B. Javer; CFP™fp-book3

Suppose you are a physician or other individual who own a farm that for many years was located well outside the city limits of a growing community, and now the farm is in the path of this growth?   

The dynamics of determining the fair market value of your farm have changed.  You might be inclined to value it as a farm and your estate would make the argument that it is a farm.

 

“Highest and Best Use” 

The IRS would argue the property should be valued at its highest and best use.  Unfortunately for your estate the “highest and best use” might be as a mega mall, apartment buildings, or a high-rise office building.  

All considerably more valuable than the farm might be worth.  

Enter Internal Revenue Code Section §2032A 

Valuation of a property at the highest and best use might force the survivors to sell the land to pay a large estate tax. 

On the other hand, valuation at its present use might enable the survivors to carry on the farm business.   

IRC Section 2032A permits qualifying estates to value at least a portion of the real property at its “qualified use.”  The section applies to farms or other trades or businesses.  

Major Requirements 

Five major requirements and conditions must be satisfied.  Ultimately, the maximum amount by which the value of the special use real estate can be reduced is $800,000 – or other amount indexed for inflation – after Y2000.  

Assessment 

While this is not an insignificant amount, if there is a large disparity between “highest and best use” and present use value, then planning to avoid the potential liquidity deficit is imperative. 

Conclusion 

Please opine and comment if you have ever considered or used this strategy; and what was the result? 

Book info: http://www.jbpub.com/catalog/0763745790/ 

Linguistics: www.HealthDictionarySeries.com 

Related: http://www.aicpa.org/PUBS/jofa/jan98/sbtaxsol.htm

Product DetailsProduct DetailsProduct Details    

Filed under: Estate Planning | Tagged: | Leave a comment »

Hospital-Based Home Care

Posted on March 28, 2008 by Dr. David Edward Marcinko MBA MEd CMP™

Agency Count Declines

Staff Writers 

ho-journal2 

Over the past decade, the home care industry has evolved away from agencies that are affiliated with hospitals and toward independent, non-facility-based agencies.  

Review 

For example, in a recent study it was reported that the number of home care agencies in the U.S. fell nearly 10% in this period, to 13,313 in 2005 from 14,670 in 1996.  

But, as the total number of home care agencies slipped over these 10 years, the number of agencies that were hospital-based plunged by more than one-third, to 1,636 from 2,563 in 1997. Hospital-based home care agencies accounted for just 12.3% of all agencies in 2005, down notably from 17.0% in 1997.  

Assessment 

Spurred by an aging U.S. population, demand for home care is growing. Generally less costly than hospital-based care, home care has benefited from government and third-party initiatives aimed at containing costs at non-hospital sites.  

In the years to come, these government and third-party payer cost management efforts are expected to put increased pressure on hospital-based home care agencies. 

Conclusion 

As medical practitioners, physicians and/or nurse executives, or healthcare administrators; how will the above findings affect you and your institution? Your comments are appreciated. 

Institutional: www.HealthcareFinancials.com 

Terms: www.HealthDictionarySeries.com 

Acknowledgements: We recognize Richard L Frye PhD and Verispan LLC, Yardley, Pa., as the research and reporting source for this information, reprinted with permission and based on information gathered by mail and telephone surveys gathered and effective as of December 31, 2007.  It was commissioned, sponsored and underwritten in an arm’s length fashion by the Managed Care Digest Series of sanofi-aventis, Bridgewater, NJ, and developed and produced by Forte Information Resources, LLC, Denver, Colorado, USA

Filed under: Managed Care | Leave a comment »