Introducing the Kohl Farm
Sower works diligently to offer tax-advantaged solutions to our investors and add meaningful value. At the same time, we pride ourselves on embracing complex challenges to overcome those challenges for our clients. When Sower launched its Legacy Farmland Fund (“LFF”) at the beginning of 2024, we aimed to create a solution that adds value while being tax-advantaged. Sower is pleased to announce that in the 1st quarter of 2025, we have closed on the first asset into the Legacy Farmland Fund – The Kohl Farm.
Located in central Iowa, the Kohl Farm is a 192-acre corn and soybean farm that is highly productive. Primary soils for this property are silty clay loam which are optimal for corn and bean rotations. The farm is a piece of a larger portfolio of farmland holdings that have been owned and operated by the Kohl family for multiple generations. In addition to their row crop operations, the Kohls also have a robust cattle operation.
The Challenge
It’s estimated that 370 million acres of U.S. farmland will transition from one generation to the next which provides complex challenges for farmland families with multiple heirs and differing interests and goals. The challenge is finding a simple yet equitable solution for farming families who are going through succession and estate planning. Selling the farm is often the solution that is chosen, but that can often cause issues for the family members, especially if some family members are operating the farm. Many times, these families have low-cost basis in their land as well which can lead to burdensome capital gains taxes.
Sower’s Solution
Sower’s Legacy Farmland Fund is an excellent solution to this challenge. Farmland families can contribute their farmland through Section 721 of the Internal Revenue Code in exchange for an ownership interest in LFF. After the exchange, the family now owns partnership units of LFF rather than directly owning the farmland. Now, the family members can equitably divide their ownership without selling the farm, breaking it up, or risking losing the right to operate the farm in the future. Now, the family members can equitably divide up their ownership without selling the farm, breaking up the farm, or risking losing the right to operate the farm in the future. By utilizing this unique solution, a multi-generational farm family has the security of knowing they will continue to operate this farm for many years to come.
The First 721 Exchange Fund in Farmland
The Kohl Farm represents the first 721 exchange of farmland into a fund comprised solely of contributed farms. This is an exciting milestone for Sowers’s Legacy Farmland Fund to pioneer this solution for farmland families across the United States. With the upcoming generational transfer of farmland that is on the horizon, our hope is that this practical solution will create significant value for our clients.