Clayton Leverett

Austin-American Statesman

Death tax could mean end for fifth-generation rancher

Clayton T. Leverett, SPECIAL CONTRIBUTOR

Wednesday, March 25, 2009

Note: Clayton Leverett is an experienced public spokesman.  Please contact Adam Nicholson to request an interview with Mr. Leverett about his death tax story.

I am the owner of a ranch that has been in my family for five generations. If current trends continue, I'll be the last in that line. My family's way of life is threatened by the death tax.

My great-great-grandfather was a rags-to-riches pioneer. In the late 1860s, James Clayton Stribling Sr., son of an immigrant from England, moved from his birthplace in Tennessee to Texas. Arriving with little more than the shirt on his back, he began leasing land to graze cattle.

Stribling gradually increased his ranch land by buying small tracts from neighbors. Over the course of his lifetime, he bought several thousand acres. When he died, the land then went to his children. His children continued the ranching tradition and passed it on to their five children, including my grandmother. It is with my grandmother that my family first discovered the death tax.

When she died in 1997, the Internal Revenue Service handed my father an invoice of 38.5 percent minus a small deduction, on the appraised value of the land — the land that her grandfather had worked so hard to purchase, protect and work.

As is the case with so many ranchers, her estate didn't have many liquid assets or a large amount of cash with which he could pay the debt. His only choice was to sell or take a loan. He took the largest loan available and, even then, was forced to sell several thousand acres.

Fast forward to the summer of 2006. My father began to get ill and so we began planning his estate. We put together an army of attorneys, CPAs and tax planners in hopes of avoiding the tax burden my grandmother's estate left. Alas, our hope in tax-shelter magic was not to be realized.

In November 2006, my father passed away, and my brother and I became the fifth generation to own and work the land — assuming we could pay the tax. Once again, our liquid assets were negligible, and our revenues could not cover the tax (even if we were to fail to feed our cattle and ourselves for the next 10 years). The few liquid assets we had were quickly spent on CPAs, tax attorneys, surveyors and appraisers to determine what we owed the IRS. Between the tax planning before my father's death and the IRS valuation of his estate, we spent more than $60,000.

As with my grandmother's estate, the amount was staggering and above our ability to pay. Once again, we took out the largest loan possible but were still forced to sell 10 percent of our land to pay the tax. Should our business revenue decrease in the next 15 years, we will probably be forced to sell more land. We will only be able to sell so much before the ranch becomes unprofitable and we are forced to sell the entire operation.

Because of the expenses of our loans, we won't be adding more cattle. Nor will we start any new (and necessary) maintenance projects or hire anyone (despite our need for full-time help). Consequently, just when the local economy needs our help the most, my family will be focused on surviving.

There was a time when the biggest challenges for ranchers were the Texas storms, droughts and various diseases. A fortunate family might actually make a small profit after dealing with nature's fury. Today, thanks to the death tax, not only are we trying to make a small family business in ranching profitable for ourselves; we are now trying to make it profitable for the IRS.

We have diligently paid our local, state and federal income taxes. We have sowed into our local, state and national economy. But because we're now defined as wealthy according to someone else's definition of the word, it will be next to impossible to preserve our family heritage for another generation.

Thomas Jefferson observed: "A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned. This is the sum of good government."

Is the death tax conducive to the sum of good government?

The Leverett family operates a ranch near Llano.

 Click here to watch a video of Clayton Leverett's testimony.