The 2023 Fall conference was another success. Thank you to all who participated, including attendees, sponsors, vendors, and board members. And a big thank you to Darcy Burnett with Iowa Bankers Association for her efforts and energy to ensure that all ran smoothly. We had a great line up of speakers and I hope that all of you were able to take away some useful ideas for your organization.

As I wind down my year as President, I am incredibly grateful for the opportunity to serve. Reflecting back on the year- the most valuable parts of the ITA are being in the same room with like minded people. Whether it is the peer group meeting, held in April and October, or the annual conference meeting. We are able to connect with our peers, bounce ideas off of each other, ask for help in a certain situation, or share our stories. I always leave these meetings feeling energized and ready for another day.

Good luck to everyone as we wrap up 2023 and work to complete our year end tasks. May you take some well-deserved vacation to spend time with family and friends over the holidays. Before we know it- 2024 will be here!

Thank you to everyone who was a part of the 2023 ITA Fall Conference. The association is already planning another great event for 2024. The event will be Sept. 30-Oct. 2, 2024 in West Des Moines. 

Wednesday's speakers included Dave Specht discussing generational continuity and then concluded with the Voice of the Kansas City Chief's Mitch Holthus.

On Wednesday, ITA held its annual meeting. President Brenda Heisch reviewed the yearly financials and provided an update for the association. Heisch then handed off the gavel to the incoming 2024 ITA President. Kyle Irvin will chair the group in the upcoming year. Irvin addressed the group and also thanked Heisch for her service.

The board and association members also thank outgoing board member Craig Schrader of West Bank for his years of service to the association. Schrader served on the board for eight years, including two as the association’s president during the pandemic.

Partnership tax law when combined with Trust tax law provides all kinds of interesting scenarios.

At a basic level contributions to a partnership are made tax free when the partner receives a corresponding partnership interest. The partner’s share determines the amount of income or loss allocated to the partner. A partner’s basis, shown generally in a capital account, is increased by contributions to the partnership or income allocated to the partner’s share. Whereas a partner’s basis is decreased by losses and distributions allocated to that partner. The partnership will never pay taxes, rather the 1065 is filed to allocate income and losses amongst the partners. It is important to note that partners may be allocated K-1 taxable income even though distributions in that amount have not been made by the Partnership. Some of the interesting results here can come from depreciable rental real estate where the depreciation losses exceed the income.

As opposed to a partnership, a trust can pay tax at the trust level. However, obviously income can also be distributed to the beneficiaries of a trust to the extent a distribution deduction exists. There are different distribution deductions available based on whether a trust is considered to be a simple trust or a complex trust. As a reminder, under IRC 651 a simple trust is defined as a trust where:

Trusts not fitting the simple trust definition are referred to under the tax code as complex trusts. Estates are always complex trusts because they will, by their nature, involve principal distributions. The distribution deduction for a 1041 for a complex trust is determined under Section 661 of the IRC. 661 bases the distribution deduction of a complex trust on the lesser of 1) the amount of accounting income required to be distributed plus “any other amounts properly paid or credited or required to be distributed for such taxable year” or 2) taxable DNI.

Both a simple trust in IRC 651 and a complex trust under IRC 661 allow for a deduction for income that is “required to be distributed currently.” But even if this income is required to be distributed, there can be situations where the income was not actually distributed. Even if the income was not actually distributed, but had been required to be distributed, there is still a distribution deduction. Again, as long as the income was required to be distributed, the trust will still qualify as a simple trust even if it wasn’t actually distributed.

[T]he amount of income for the taxable year required to be distributed currently by a trust as described in section 651 shall be included in the gross income of the beneficiaries to whom the income is required to be distributed, whether distributed or not. IRC 652

The distribution deduction statutes set the tone for where the tax will be reported, either at the trust level or passed-through down to the beneficiary. The deduction is the lesser of accounting income or DNI. If accounting income is less than DNI then some income will be left in the trust because not all of the DNI is deducted from the trust and the trust will pay tax at the trust level. If accounting income is greater than DNI, then the beneficiary gets a higher amount (distributes all of the accounting income) than they will be taxed on (DNI).

Traveling Iowa’s country roads in the fall reveals a world of continual change as summer’s green gives way to gold.

The countryside is changing in other less noticeable ways, too. As the years pass, fields transition to new owners who assume their roles as the next stewards of our productive and historic landscape.

Recent results from the Iowa Farmland Ownership and Tenure Survey (Tong, J. and Zhang, W., 2023) show shifts in Iowa’s land ownership and management, including the following:

Overall, it appears that Iowans tend to hold on to their land, passing it on to future generations, often through a trust. And that the momentum around trusts will continue.

In addition to being a financial and estate planning vehicle, trusts can also incorporate important conservation components. And today, trust planning and management provides an unprecedented opportunity to share conservation options with landowner clients.

There are several more reasons to discuss conservation with your clients, including:

Conservation is perhaps best described as the wise and responsible use of land, water and other natural resources. Conservation approaches can take many shapes and sizes.

To keep Iowa productive, we are excited to highlight how farmers and landowners can integrate conservation practices onto working lands, such as pastures and cropland.

Successful conservation in an agricultural state like Iowa begins with individual landowners making the decision to care for the land and water while still being productive; and relies on other landowners doing the same.

Our goal is to build Iowa’s future with healthy land, clean water and resilient resources that can support generations to come. We invite you to join us in this effort. Your discussions around conservation may be instrumental in educating and encouraging landowners to be excellent stewards of Iowa's land.

We will be sharing additional articles on incorporating working lands conservation into trusts. For more information, contact your local USDA Service Center/Soil & Water Conservation District.

By Sower | Legacy Farmland Fund

As a reminder, the Iowa Trust Association welcomes contributors to its quarterly newsletter. If you would like to comment on recent activities in the industry or let us know about an upcoming event that would be of interest to our readers, please feel free to contact Darcy Burnett, at 800-987-7365. Thank you for your interest in our publication and we look forward to hearing from you.

If this message was forwarded to you and you would like to receive the ITA Newsletter, please email Darcy Burnett to subscribe.