Drought stricken farmers and ranchers receive IRS help
Drought stricken farmers and ranchers receive IRS help
The Internal Revenue Service announced recently farmers and ranchers in Hawaii who previously were forced to sell livestock because of drought have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales. In addition, those who sell more livestock than they normally would, because of drought, may 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.
“This IRS relief can help Hawaii’s farmers and ranchers suffering from this challenging drought,” said IRS spokesman David Tucker. “They now have more time to buy livestock and to pay their taxes.”
The one-year extension of the replacement period announced recently generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes because of 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, 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, 2013 and Aug. 31, 2014.
The Hawaii counties of Hawaii, Kalawao and Maui are listed. Any county contiguous to a county listed by the center also qualifies for this relief.
As a result, farmers and ranchers in Hawaii whose drought sale replacement period was scheduled to expire at the end of this tax year, Dec. 31 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 2010. But because of previous drought-related extensions have more time to buy livestock and to pay their taxes. Additional extensions will be granted if severe drought conditions persist.
Details on this relief, including a list of NDMC-designated counties, are available in Notice 2014-60, 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 website.