Mississippi Code 1972 (2023) › Title 27 - TAXATION AND FINANCE (§§ 27-1-1 — 27-117-15) › Chapter 9 - ESTATE TAX (§§ 27-9-1 — 27-9-61) › Section 27-9-8 - Valuation of farm and closely held business property

(1)
(a)
If the decedent was, at the time of his death, a resident of the State of Mississippi, and the executor elects the application of this section and files the agreement referred to in subsection (4)(b), then, for the purposes of this chapter, the value of qualified real property shall be its value for the use under which it qualifies, under subsection (2), as qualified real property.
(b)
The aggregate decrease in the value of qualified real property taken into account for purposes of this chapter which results from the application of subsection (1)(a) with respect to any decedent shall not exceed Five Hundred Thousand Dollars ($500,000.00).
(2)
(a)
For purposes of this section, the term "qualified real property" means real property located in the State of Mississippi which, on the date of the decedent's death, was being used for a qualified use, but only if:
(i)
Fifty percent (50%) or more of the adjusted value of the gross estate consists of the adjusted value of real or personal property which:
1.
On the date of the decedent's death, was being used for a qualified use, and
2.
Was acquired from or passed from the decedent to a qualified heir of the decedent.
(ii)
Twenty-five percent (25%) or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of subsections (2)(a)(i)2 and (2)(a)(iii).
(iii)
During the period of eight (8) years ending on the date of the decedent's death there have been periods aggregating five (5) years or more during which:
1.
Such real property was owned by the decedent or a member of the decedent's family and used for a qualified use; and
2.
There was material participation by the decedent or a member of the decedent's family in the operation of the farm or other business; and
(iv)
Such real property is designated in the agreement referred to in subsection (4)(b).
(b)
For purposes of this section, the term "qualified use" means the devotion of the property to any of the following:
(i)
Use as a farm for farming purposes; or
(ii)
Use in a trade or business other than the trade or business of farming.
(c)
For purposes of subsection (2)(a), the term "adjusted value" means:
(i)
In the case of the gross estate, the value of the gross estate for purposes of this chapter (determined without regard to this section), reduced by any amounts allowable as a deduction under
26 U.S.C.S. 2053(a)(4)
; or
(ii)
In the case of any real or personal property, the value of such property for purposes of this chapter (determined without regard to this section), reduced by any amounts allowable as a deduction in respect of such property under
26 U.S.C.S. 2053(a)(4)
.
(3)
(a)
There is hereby imposed an additional estate tax if, within fifteen (15) years after the decedent's death and before the death of the qualified heir:
(i)
The qualified heir disposes of any interest in qualified real property (other than by a disposition to a member of his family); or
(ii)
The qualified heir ceases to use for the qualified use the qualified real property which was acquired (or passed) from the decedent.
(b)
(i)
The amount of the additional tax imposed by subsection (3)(a) with respect to any interest shall be the amount equal to the lesser of:
1.
The adjusted tax difference attributable to such interest; or
2.
The excess of the amount realized with respect to the interest (or, in any case other than a sale or exchange at arm's length, the fair market value of the interest) over the value of the interest determined under subsection (1).
(ii)
For purposes of subsection (3)(b)(i), the adjusted tax difference attributable to an interest is the amount which bears the same ratio to the adjusted tax difference with respect to the estate, determined under subsection (3)(b)(iii) as:
1.
The excess of the value of such interest for purposes of this chapter, determined without regard to subsection (1), over the value of such interest determined under subsection (1), bears to:
2.
A similar excess determined for all qualified real property.
(iii)
For purposes of subsection (3)(b)(ii), the term "adjusted tax difference with respect to the estate" means the excess of what would have been the estate tax liability but for subsection (1) over the estate tax liability. For purposes of this subsection, the term "estate tax liability" means the tax imposed by Section
27-9-5
reduced by the exemptions and deductions allowable against such tax.
(iv)
For purposes of this subsection, where the qualified heir disposes of a portion of the interest acquired by, or passed to, such heir, or a predecessor qualified heir, or there is a cessation of use of such a portion:
1.
The value determined under subsection (1) taken into account under (3)(b)(i)2 with respect to such portion shall be its pro rata share of such value of such interest; and
2.
The adjusted tax difference attributable to the interest taken into account with respect to the transaction involving the second or any succeeding portion shall be reduced by the amount of the tax imposed by this subsection with respect to all prior transactions involving portions of such interest.
(c)
If the date of the disposition or cessation referred to in subsection (3)(a) occurs more than one hundred twenty (120) months and less than one hundred eighty (180) months after the date of the death of the decedent, the amount of the tax imposed by this subsection shall be reduced (but not below zero) by an amount determined by multiplying the amount of such tax (determined without regard to this paragraph) by a fraction:
(i)
The numerator of which is the number of full months after such death in excess of one hundred twenty (120); and
(ii)
The denominator of which is sixty (60).
(d)
In the case of an interest acquired from (or passing from) any decedent, if subsection (3)(a)(i) or (3)(a)(ii) applies to any portion of an interest, subsection (3)(a)(i) or (3)(a)(ii), as the case may be, shall not apply with respect to the same portion of such interest.
(e)
The additional tax imposed by this subsection shall become due and payable on the day which is six (6) months after the date of the disposition or cessation referred to in subsection (3)(a).
(f)
The qualified heir shall be personally liable for the additional tax imposed by this subsection with respect to his interest.
(g)
For purposes of subsection (3)(a)(ii), real property shall cease to be used for the qualified use if:
(i)
Such property ceases to be used for the qualified use set forth in subsection (2)(b)(i) or (2)(b)(ii) under which the property qualified under subsection (2); or
(ii)
During any period of eight (8) years ending after the date of the decedent's death and before the date of the death of the qualified heir, there had been periods aggregating three (3) years or more during which:
1.
In the case of periods during which the property was held by the decedent, there was no material participation by the decedent or any member of his family in the operation of the farm or other business; and
2.
In the case of periods during which the property was held by any qualified heir, there was no material participation by such qualified heir or any member of his family in the operation of the farm or other business.
(4)
(a)
The election under this section shall be made not later than the time prescribed for filing the return of tax imposed by Section
27-9-5
(including extensions thereof), and shall be made in such manner as the commissioner shall by regulation prescribe.
(b)
The agreement referred to in this paragraph is a written agreement signed by each person in being who has an interest (whether or not in possession) in any property designated in such agreement consenting to the application of subsection (3) with respect to such property.
(5)
For purposes of this section:
(a)
The term "qualified heir" means, with respect to any property, a member of the decedent's family who acquired such property (or to whom such property passed) from the decedent. If a qualified heir disposes of any interest in qualified real property to any member of his family, such member shall thereafter be treated as the qualified heir with respect to such interest.
(b)
The term "member of the family" means, with respect to any individual, only such individual's ancestor or lineal descendant, a lineal descendant of a grandparent of such individual, the spouse of such individual, or the spouse of any such descendant. For purposes of the preceding sentence, a legally adopted child of an individual shall be treated as a child of such individual by blood.
(c)
In the case of real property which meets the requirements of subsection (2)(a)(iii), residential buildings and related improvements on such real property occupied on a regular basis by the owner or lessee of such real property or by persons employed by such owner or lessee for the purpose of operating or maintaining such real property, and roads, buildings and other structures and improvements functionally related to the qualified use shall be treated as real property devoted to the qualified use.
(d)
The term "farm" includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards and woodlands.
(e)
The term "farming purposes" means:
(i)
Cultivating the soil or raising or harvesting any agricultural or horticultural commodity (including the raising, shearing, feeding, caring for, training and management of animals) on a farm;
(ii)
Handling, drying, packing, grading or storing on a farm any agricultural or horticultural commodity in its unmanufactured state, but only if the owner, tenant or operator of the farm regularly produces more than one-half (1/2) of the commodity so treated; and
(iii)
1.
The planting, cultivating, caring for or cutting of trees, or
2.
The preparation (other than milling) of trees for market.
(f)
(i)
Except as provided in subsection (5)(f)(ii), the value of a farm for farming purposes shall be determined by dividing:
1.
The excess of the average annual gross cash rental for comparable land used for farming purposes and located in the locality of such farm over the average annual state and local real estate taxes for such comparable land, by
2.
The average annual effective interest rate for all new federal land bank loans. For purposes of the preceding sentence, each average annual computation shall be made on the basis of the five (5) most recent calendar years ending before the date of the decedent's death.
(ii)
The formula provided by subsection (5)(f)(i) shall not be used:
1.
Where it is established that there is no comparable land from which the average annual gross cash rental may be determined, or
2.
Where the executor elects to have the value of the farm for farming purposes determined under subsection (5)(g).
(g)
In any case to which subsection (5)(f)(i) does not apply, the following factors shall apply in determining the value of any qualified real property:
(i)
The capitalization of income which the property can be expected to yield for farming or closely held business purposes over a reasonable period of time under prudent management using traditional cropping patterns for the area, taking into account soil capacity, terrain configuration and similar factors;
(ii)
The capitalization of the fair rental value of the land for farmland or closely held business purposes;
(iii)
Assessed land values if a differential or use value assessment law exists for farmland or closely held business;
(iv)
Comparable sales of other farm or closely held business land in the same geographical area far enough removed from a metropolitan or resort area so that nonagricultural use is not a significant factor in the sale price; and
(v)
Any other factor which fairly values the farm or closely held business value of the property.
(6)
If qualified real property is disposed of or ceases to be used for a qualified use, then:
(a)
The statutory period for the assessment of any additional tax under subsection (3) attributable to such disposition or cessation shall not expire before the expiration of three (3) years from the date the commissioner is notified (in such manner as the commissioner may by regulation prescribe) of such disposition or cessation; and
(b)
Such additional tax may be assessed before the expiration of such period of three (3) years notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(7)
The commissioner shall prescribe regulations setting forth the application of this section in the case of an interest in a partnership, corporation or trust which, with respect to the decedent, is an interest in a closely held business.
Laws, 1978, ch. 452, § 3, eff. 7/1/1978.