Special Use Valuation for Farms and Business Real Estate

§ 2032A. Valuation of certain farm, etc., real property(a) Value based on use under which property qualifies(1) General ruleIf—(A) the decedent was (at the time of his death) a citizen or resident of the United States, and (B) the executor elects the application of this section and files the agreement referred to in subsection (d)(2), then, for purposes of this chapter, the value of qualified real property shall be its value for the use under which it qualifies, under subsection (b), as qualified real property. (2) Limitation on aggregate reduction in fair market valueThe aggregate decrease in the value of qualified real property taken into account for purposes of this chapter which results from the application of paragraph (1) with respect to any decedent shall not exceed $750,000. (3) Inflation adjustmentIn the case of estates of decedents dying in a calendar year after 1998, the $750,000 amount contained in paragraph (2) shall be increased by an amount equal to—(A) $750,000, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 1997” for “calendar year 2016” in subparagraph (A)(ii) thereof. If any amount as adjusted under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the next lowest multiple of $10,000. (b) Qualified real property(1) In generalFor purposes of this section, the term “qualified real property” means real property located in the United States 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) 50 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) 25 percent or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of subparagraphs (A)(ii) and (C), (C) during the 8-year period ending on the date of the decedent’s death there have been periods aggregating 5 years or more during which—(i) such 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 or other business, and (D) such real property is designated in the agreement referred to in subsection (d)(2).