The Sale of a Dairy to Fund Retirement

Our client was getting ready to retire and wanted to sell their dairy to fund their retirement. However, their farm operation was encumbered by considerable debt. Furthermore, hoping to avoid outliving their financial resources, the client wanted to reduce their tax bill as much as possible.

The dairy was comprised of two farm properties, one large and one small, as well as all their livestock, feed and farm equipment.

In response to these objectives, we set up a plan to:

• Sell the smaller property for $1.6MM. By using an 8-year traditional Structured Installment Sale, the client was able to take a pledge loan from First State Bank Nebraska to pay off part of the debt
• Sell the livestock, equipment and feed and set up a matching 8-year installment sale plan for further debt reduction.
• Sell the larger property for $4.4MM:
  • Half the proceeds were spread over 8 years to set up a pledge loan to pay off all the remaining debt.
  • The other half of the proceeds will provide the client a 20-year installment payment plan generating more than $110K per year to use as a quasi-pension plan to help finance their retirement.

As a result of using Structured Installment Sale Strategies, our client was able to achieve all their objectives:

• Retire all their debt
• Minimize the taxes paid
• Maximize the proceeds from the sale to fund their retirement for 20 years, during which time all the tax deferred retirement accounts they have set aside will continue to grow untouched until such time as they are required by law to begin taking minimum distributions. Furthermore, any taxes they may have to pay on their annual installments will be paid at the lower Capital Gains tax rates