Tax Tip 2022-152: Farmers and ranchers hit hard by drought may be eligible for extension of tax relief

IRS Tax Tips October 4, 2022
Useful Links: IRS.gov Help For Hurricane Victims News Essentials What's Hot News Releases IRS - The Basics IRS Guidance Media Contacts Facts & Figures Around The Nation e-News Subscriptions The Newsroom Topics Multimedia Center Noticias en Español Radio PSAs Tax Scams/Consumer Alerts The Tax Gap Fact Sheets IRS Tax Tips Armed Forces Latest News IRS Resources Contact Your Local IRS Office Filing Your Taxes Forms & Instructions Frequently Asked Questions Taxpayer Advocate Service Where to File IRS Social Media	Issue Number: Tax Tip 2022-152 Farmers and ranchers hit hard by drought may be eligible for extension of tax relief Farmers and ranchers forced to sell livestock because of drought conditions may have more time to replace their livestock and defer tax on any gains from the forced sales. The IRS recently announced a one-year extension which gives eligible farmers and ranchers until the end of their first tax year after the first drought-free year to replace the sold livestock. How the extension works This extension applies to eligible farmers and ranchers who qualified for the four-year replacement period, if the they were suffering exceptional, extreme or severe drought conditions as determined by the National Drought Mitigation Center during any week between Sept. 1, 2021, and Aug. 31, 2022. Because the normal drought-sale replacement period is four years, this extension impacts drought sales that occurred during 2018. As a result, eligible farmers and ranchers with a drought-sale replacement period ending Dec. 31, 2022, now have until the end of their next tax year to replace the sold livestock. The replacement periods for some drought sales before 2018 are also affected due to previous drought-related extensions affecting some of these localities. For details on how the provision works, taxpayers should read IRS Notice 2006-82. Eligible livestock sales The sales must be solely due to drought in an area eligible for federal assistance. Farmers and ranchers must replace the livestock within a four-year period, instead of the usual two-year period. The IRS may extend this replacement period if the drought continues. The relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry aren't eligible. Regions designated as eligible for federal assistance Taxpayers can refer to IRS Notice 2022-43 for the list of areas eligible for federal assistance. The list includes 44 states, two U.S. Territories and two independent nations in a Compact of Free Association with the United States.   More information: Publication 225, Farmer's Tax Guide Notice 2006-82, Extension of Replacement Period for Livestock Sold on Account of Drought   Share this tip on social media -- #IRSTaxTip:Farmers and ranchers hit hard by drought may be eligible for extension of tax relief. http://ow.ly/yj3050KZXGv Back to top               Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov. This message was distributed automatically from the IRS Tax Tips mailing list. Please Do Not Reply To This Message.

 

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