Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-57 - State of Washington Estate and Transfer Tax Reform Act rules › Section 458-57-155 - Farm deduction

Current through Register Vol. 24-14, July 15, 2024
(1)
Introduction.
This rule applies to deaths occurring on or after
			 May 17, 2005, and is intended to help taxpayers determine if the estate is
			 eligible for the farm deduction and to correctly calculate the
			 deduction.
(2)
Definitions.
The following terms and definitions are applicable
			 throughout chapter 458-57 WAC:
(a) "Active
			 management" means the making of the management decisions of a farm, other than
			 the daily operating decisions;
(b)
			 "Farm" includes stock, dairy, poultry, fruit, furbearing animal, and truck
			 farms; plantation; ranches; nurseries; ranges; greenhouses or other similar
			 structures used primarily for the raising of agricultural or horticultural
			 commodities; and orchards and woodlands;
(c) "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 of the commodity so
			 treated; and
(iii)
(A) The planting, cultivating, caring for, or
			 cutting of trees; or
(B) The
			 preparation, other than milling, of trees for market.
(d) "Member of the family" means,
			 with respect to any individual, only:
(i) An
			 ancestor of the individual;
(ii)
			 Spouse of the individual;
(iii) A
			 lineal descendant of the individual; of the individual's spouse, or a parent of
			 the individual; or
(iv) The spouse
			 of any lineal descendant described in (d)(iii) of this subsection.
A legally adopted child of an individual shall be treated as
				the child of such individual by blood.
(e) "Qualified heir" means, with respect to
			 any property, a member of the decedent's family who acquired property, or to
			 whom property passed, from the decedent.
(f)
(i)
			 "Qualified real property" means real property which was acquired from or passed
			 from the decedent to a qualified heir of the decedent and which, on the date of
			 the decedent's death, was being used for a qualified use by the decedent or a
			 member of the decedent's family, but only if:
(A) Fifty percent or more of the adjusted
			 value of the gross estate consists of the adjusted value of real or personal
			 property which:
(I) On the date of the
			 decedent's death, was being used for a qualified use by the decedent or a
			 member of the decedent's family; and
(II) Was acquired from or passed from the
			 decedent to a qualified heir of the decedent;
(B) Twenty-five percent or more of the
			 adjusted value of the gross estate consists of the adjusted value of real
			 property which meets the requirements of (f)(i)(A)(II) and (C) of this
			 subsection; and
(C) During the
			 eight-year period ending on the date of the decedent's death there have been
			 periods aggregating five years or more during which:
(I) The real property was owned by the
			 decedent or a member of the decedent's family and used for a qualified use by
			 the decedent or a member of the decedent's family; and
(II) There was material participation by the
			 decedent or a member of the decedent's family in the operation of the farm. For
			 the purposes of this subsection (f)(i)(C)(II), material participation shall be
			 determined in a manner similar to the manner used for purposes of section
			 1402(a)(1) of the Internal Revenue Code (IRC).
(ii) For the purposes of this subsection, the
			 term "adjusted value" means:
(A) In the case
			 of the gross estate, the value of the gross estate, determined without regard
			 to any special valuation under section 2032A of the IRC, reduced by any amounts
			 allowable as a deduction under section 2053(a)(4) of the IRC; or
(B) In the case of any real or personal
			 property, the value of the property for purposes of chapter 11 of the IRC,
			 determined without regard to any special valuation under section 2032A of the
			 IRC, reduced by an amount allowable as a deduction in respect of such property
			 under section 2053(a)(4) of the IRC.
(g) "Qualified use" means the property is
			 used as a farm for farming purposes. In the case of real property which meets
			 the requirements of (f)(i)(C) of this subsection, residential buildings and
			 related improvements on the real property occupied on a regular basis by the
			 owner or lessee for the purpose of operating or maintaining the 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. For tangible personal property eligible for a deduction under
			 subsection (1)(b) of this section, "qualified use" means the property is used
			 primarily for farming purposes on a farm.
(h) "Qualified woodland" means any real
			 property which:
(i) Is used in timber
			 operations; and
(ii) Is an
			 identifiable area of land such as an acre or other area for which records are
			 normally maintained in conducting timber operations.
(i) "Timber operations" means:
(i) The planting, cultivating, caring for, or
			 cutting of trees; or
(ii) The
			 preparation, other than milling, of trees for market.