Drought-Stricken Farmers and Ranchers Have More Time to Replace Livestock
By: Stephen Crews
Updated: October 1, 2012
Farmers
and ranchers who previously were forced to sell livestock due to
drought, like the drought currently affecting
much of the nation, have an extended period of time in which to replace
the livestock and defer tax on any gains from the forced sales, the
Internal Revenue Service announced today.
Farmers
and ranchers who, due to drought, sell more livestock than they
normally would may defer tax on the extra gains from those
sales. To qualify, the livestock generally must be replaced within a
four-year period. The IRS is authorized to extend this period if the
drought continues.
The
one-year extension of the replacement period announced today generally
applies to capital gains realized by eligible farmers
and ranchers on sales of livestock held for draft, dairy or breeding
purposes due to drought. Sales of other livestock, such as those raised
for slaughter or held for sporting purposes, and poultry are not
eligible.
The
IRS is providing this relief to any farm located in a county, parish,
city or district, listed as suffering exceptional, extreme
or severe drought conditions by the National Drought Mitigation Center
(NDMC), during any weekly period between Sept. 1, 2011, and Aug. 31,
2012. All or part of 43 states are listed. Any county contiguous to a
county listed by the NDMC also qualifies for this
relief.
As
a result, farmers and ranchers in these areas whose drought sale
replacement period was scheduled to expire at the end of this
tax year, Dec. 31, 2012, in most cases, will now have until the end of
their next tax year. Because the normal drought sale replacement period
is four years, this extension immediately impacts drought sales that
occurred during 2008. But because of previous
drought-related extensions affecting some of these localities, the
replacement periods for some drought sales before 2008 are also
affected. Additional extensions will be granted if severe drought
conditions persist.
Details
on this relief, including a list of NDMC-designated counties, are
available in Notice 2012-62, posted today on IRS.gov. Details
on reporting drought sales and other farm-related tax issues can be
found in Publication
225, Farmer's Tax Guide, also available on the IRS web site.
