The Internal Revenue Service has announced that individuals who were forced to sell off livestock due to the ongoing drought still affecting Texas and many other states can avoid paying taxes on gains they made from such sales by obtaining new livestock.
Farmers and ranchers who qualify for this deferment generally must purchase new livestock within four years, but this period has been extended by one year. It is within the power of the IRS to call for another extension if the drought persists. Individuals in the affected areas now have until the end of the coming tax year to seek replacement livestock. The IRS announced that only capital gains on livestock raised for breeding, draft or dairy purposes qualify for deferment.
“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, during any weekly period between Sept. 1, 2011, and Aug. 31, 2012,” explained an IRS representative in Dallas. The representative added that Texas is among the 43 states with regions qualifying for relief.
The replacement period affects drought sales since 2008. However, previous extensions in drought-affected areas are affected by the measure, meaning that some drought sales from before 2008 may qualify for deferment as well. More information on whether a given county or sale is affected by the extension can be found on the IRS website.
While the worst of the drought occurred between 2007 and 2009, farmers and ranchers across Texas are still reeling from its affects. Many agricultural professionals described the drought as among the most severe they had experienced, having especially devastating effects on the state’s water supply.
Source: TimesRecordNews, “IRS gives extension for livestock sales,” Sep. 28, 2012