Abstract
AbstractA modified Vickers model is used to show that farmland capital gains provide incentive to increase farm acreage and debt use. Farmland capital losses have the opposite effect. The model indicates that part of the current financial vulnerability of the U.S. farm sector can be traced to management decisions made in response to the farmland capital gains of the 1970s. The effects are not purely tax driven, though taxes can affect the magnitude of incentives. The Vickers model is modified to allow a finite horizon, taxes, and the recognition of unrealized capital gain or loss.
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