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IRS Grants Tax Relief to Drought-Stricken Farmers and Ranchers in 30 States

October 07, 2014
If you’re a farmer or rancher and drought forced you to sell your livestock,
special IRS tax relief may help you.

The IRS has extended the time to replace livestock that farmers were forced
to sell due to drought. If you’re eligible, this may help you defer tax on 
any gains you received from the forced sales. The relief applies to all or 
part of 30 states affected by drought. Here are several points you should 
know about this relief:

•If the drought caused you to sell more livestock than usual, you 
may be able to defer tax on the extra gains from those sales.

•You generally must replace the livestock within a four-year period.
The IRS has the authority to extend the period if the drought continues. 
For this reason, the IRS has added one more year to the replacement period
in 30 states.

•The one-year extension of time generally applies to certain sales
due to drought.

•If you are eligible, your gains on sales of livestock that you held for 
draft, dairy or breeding purposes apply.

•Sales of other livestock, such as those you raised for slaughter or held 
for sporting purposes and poultry, are not eligible.

•The IRS relief applies to farms in areas suffering exceptional, extreme 
or severe drought conditions. The National Drought Mitigation Center has 
listed all or parts of 30 states that qualify for relief. Any county that 
is contiguous to a county that is on the NDMC’s list also qualifies. 

•This extension immediately impacts drought sales that occurred during 2010.

•However, the IRS has granted previous extensions that affect some of these 
localities. This means that some drought sales before 2010 are also affected. 
The IRS will grant additional extensions if severe drought conditions persist.