Farmers and ranchers who were previously forced to sell livestock due to drought in an applicable region now have an additional year to replace the livestock and defer tax on any gains from the forced sales, according to the Internal Revenue Service.
The IRS recently announced that farmers and ranchers who previously were forced to sell livestock due to drought have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales.
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An applicable region is a county designated as eligible for federal assistance plus counties contiguous to that county.
The IRS states the relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes.
Under the circumstances, the IRS states that livestock generally must be replaced within a four-year period, instead of the usual two-year period.
The one-year extension gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock.
The IRS provides the extension to farmers and ranchers located in the applicable region that qualified for the four-year replacement period if any county, parish, city, or district, that is included in the applicable region is listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center, during any weekly period between Sept. 1, 2016, and Aug. 31, 2017.
As a result, farmers and ranchers in the applicable region whose drought sale replacement period was scheduled to expire at the end of this tax year, Dec. 31, 2017, in most cases, will now have until the end of their next tax year.
Additional extensions will be granted if severe drought conditions persist.