It is important when considering income, gift or estate taxes. Usually, your income tax basis in an asset is what you paid for it. Their income tax basis would decrease each year, by the amount of any depreciation on the capital improvements. If someone gives you property, you get their basis too. This provides a significant disincentive to selling the farm.
Parents can avoid the income tax on a sale by giving it to the children.
When It Pays Not to Sell From the tax standpoint, under current law, it is frequently preferable for children to receive property through the parents' estates rather than by gift or sale from the parents. We arrive at the point of trying to decide whether the advantages of getting ownership into the hands of the next generation now are worth the estimated cost. If not, you should consider some alternatives to selling rather than sitting idly and doing nothing. If you decide to postpone a sale, it may still be important to develop a strategy that will protect the parents and those children wanting to farm. Gifts, leases, and purchase options are possible means of meeting family goals.