Andy Gustafson

Farmland shares location as a common characteristic buyers associate with value. Contrary to popular opinion, not all farmland is experiencing a rise in the price per acre. According to the Federal Reserve Bank of Richmond’s latest survey of agriculture bankers in the Southeastern United States “found good farmland averaged $3,263 an acre during the third quarter – down 1.5 percent from the previous quarter and down 4.5 percent from a year earlier.” The survey noted “volatile feed prices continued to negatively impact livestock operators while the housing slump adversely impacted demand for lumber and nursery products.”

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The modern day delayed 1031 exchange, often referred to as a Starker exchange, has its roots back at the turn of the 20th century when T.J. Starker began investing in second-growth forest in Oregon. By the 1960s, T.J.’s son Bruce was part of the family business. T.J. and Bruce were able to purchased second-growth forest at a very low cost basis. As the forest land began to regrow, the value of the land increased substantially. Selling the land outright exposed the Starker’s to substantial capital gains taxes. Section 1031 of the Internal Revenue Code, which allowed a capital gains deferral for like-kind exchanges, had been in place since 1921. The problem was that up to that point, Section 1031 had been interpreted to apply only to a simultaneous exchange of like-kind property. Not surprisingly, this was often difficult to accomplish.

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