If you're a farmer or rancher and drought forced you to sell your livestock, special
IRS tax relief may help you. The IRS has extended the time to replace livestock that
farmers were forced to sell due to drought.
If you're eligible, this may help you defer tax on any gains you received from the
forced sales. The relief applies to all or part of 30 states affected by drought.
Here are several points you should know about this relief:
- If the drought caused you to sell more livestock than usual, you may be able to
defer tax on the extra gains from those sales.
- You generally must replace the livestock within a four-year period. The IRS has
the authority to extend the period if the drought continues. For this reason, the
IRS has added one more year to the replacement period in 30 states.
- The one-year extension of time generally applies to certain sales due to drought.
- If you are eligible, your gains on sales of livestock that you held for draft,
dairy, or breeding purposes apply.
- Sales of other livestock, such as those you raised for slaughter or held for
sporting purposes and poultry, are not eligible.
- The IRS relief applies to farms in areas suffering exceptional, extreme, or
severe drought conditions. The National Drought Mitigation Center has listed all
or parts of 30 states that qualify for relief. Any county that is contiguous to a
county that is on the NDMC's list also qualifies.
- This extension immediately impacts drought sales that occurred during 2010.
- However, the IRS has granted previous extensions that affect some of these
localities. This means that some drought sales before 2010 are also affected. The
IRS will grant additional extensions if severe drought conditions persist.
Please give us a call if you would like more information.
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opinions on specific facts or matters, and, accordingly, assume no liability
whatsoever in connection with its use. The information contained in this newsletter
was not intended or written to be used and cannot be used for the purpose of (1)
avoiding tax-related penalties prescribed by the Internal Revenue Code or (2)
promoting or marketing any tax-related matter addressed herein. © 2015