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IRS Gives Drought-Stricken Farmers and Ranchers More Time to Replace Livestock

IRS Gives Drought-Stricken Farmers and Ranchers More Time to Replace Livestock

IRS Gives Drought-Stricken Farmers and Ranchers More Time to Replace Livestock 

The Internal Revenue Service said that farmers and ranchers who previously were forced to sell livestock due to drought conditions currently affecting much of the nation will now have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales. 

Accounting Today notes that details on the relief, which affects 38 states, are available in Notice 2013-62 posted 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 online. 

The IRS noted that farmers and ranchers who, due to drought, sell more livestock than they normally would are able to 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 by the IRS on Friday 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 said it is providing this relief to any farm located in a county, parish, city, borough, census area or district, listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center, during any weekly period between Sept. 1, 2012, and Aug. 31, 2013. All or part of the 38 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, 2013, 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 2009. But because of previous drought-related extensions affecting some of these localities, the replacement periods for some drought sales before 2009 are also affected. Additional extensions will be granted if severe drought conditions persist.

 

 

Source:  Accounting Today at http://www.accountingtoday.com/news/IRS-Gives-Drought-Stricken-Farmers-Ranchers-More-Time-Replace-Livest-68380-1.html

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