Inheritance tax rules would use five-year family holding periods

A family receiving qualifying farm real estate would need to keep using it for agriculture to meet the stated inheritance-tax exemption condition. The rule covers real estate used for farming and transferred to, or for the benefit of, members of the same family. The property must earn at least $2,000 in yearly gross income. The transfer must be reported on a timely inheritance tax return. If the property stops being used for farming or fails the income requirement, inheritance tax and interest would be due under the stated rules. The agricultural-use condition applies for five years after the transferor's date of death.

A family receiving a qualifying family-owned business interest would need to keep the interest within the family or an eligible family-only trust to meet the stated inheritance-tax exemption condition. The rule covers family-owned business interests in proprietorships and other business entities, including businesses with fewer than 50 full-time-equivalent employees and qualifying asset values. The interest must be reported on a timely inheritance tax return. The business must meet the stated definition, including the applicable employee, asset-value and prior-existence requirements. The asset limit is $6.9 million, adjusted for inflation under the stated formula, but it cannot exceed $10 million. The family-ownership condition applies for at least five years after the decedent's date of death; the business's employee and asset tests apply as of that date.