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As government’s continue to spend away, the lucrative pull of changing acres to residential or commercial taxation over ag will continue to draw the eye of the assessors. Having the old grey mare out back is not going to save you on property taxes like it might once have.

Iowa Administrative Code 701.711.1 classifies property into difference categories and leaves it to the county assessor to apply according to its present use. If you don’t like what the property assessor does on classification (or valuation) you need to appeal in between 2 April and 30 April. This appeal is heard by a county board of review. If you don’t like what that board says, you appeal to the property appeals board. You need to make that decision relatively quickly (20 days after the local board adjourns or 20 June, whichever is later.

In a case out of Dallas County, a 25-acre parcel with two machine sheds, a hay field and two draft horses was not enough to get ag real estate taxation. The board looked at the amount of ag activity occurring on the property and the determined it wasn’t for profit. This was despite the testimony that the draft horses might be bred in the future (one was over 20 years old and the other was less than 5). The baseball field on the property also probably didn’t help sell it as ag.

However, a machine shed used in conjunction with a farm operation in a Humboldt county case, was enough to protect the ag definition, even as the surrounding uses around the farm operation became residential. The farm operator’s intent was important. The court found that determining was it a hobby or was it with profit intent to be critical to the classification.

Having an old swaybacked mare out back is probably not enough to enjoy ag classification, the closer you live to an urban area the more likely it will not be enough. To be fair, I have never been a fan of horses. A college roommate of mine once said the horses went out of style when they perfected the internal combustion engine. That might influence me. Now, as they say on social media, don’t “at me”. Other people are more than welcome to admire, care for and espouse the virtues of horses. That is, unless you can show profit motive with detailed records, business plans, and a clear path that you are engaging in ag, not rural living with out of style animals.

Terms that might be helpful

The trust: A trust is an artificial entity, something like a corporation, created by a document or instrument.

A trust requires four basic elements - trustee, trust property, trust document, and known or discernible beneficiaries. The trust document specifies the rules of operation for the trust, the powers of the trustee, the beneficiaries to share in the income and principal from the trust, and instructions for distribution of the trust property.

Trustee: The person “entrusted” with carrying out the trust plan. The trustee can be the grantor, a third party or a corporate entity (like a bank). All have a duty to be responsible and work for the good of the trust’s plan.   Duties include receipt and management of the trust assets, collection of income, accounting, tax reporting and payments, investment and income distributions according to the trust agreement.

Grantor/settlor/Trustor: The person who creates the trust (not the lawyer, the person with the assets”

Beneficiary: The person or entity. who benefits (gets the goods or money) from the trust’s plan. A beneficiary can be the grantor (individual who established the trust), spouse, relatives, friends, churches, and/or charities.

Thursday, May 06, 2021
  • Patrick B. Dillon
  • Jill Dillon
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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