WASHINGTON — 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, the Internal Revenue Service announced recently.
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.
All 75 counties in Arkansas are included on the IRS list.
The one-year extension of the replacement period 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 eligible. Any county contiguous to a county listed by the NDMC also qualifies for this relief.
Details on this relief, including a list of NDMC-designated counties, are available in Notice 2012-62, 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 on the IRS web site.