The recent burst of inflation was driven in part by industries trying to recoup some of their pandemic losses. Then the drought arrived, and things got worse.
Weather wreaks havoc in many economic sectors, but particularly in food production. And since most of us regularly shop for groceries, we notice the rising prices of, well, everything we put in our carts.
The lack of rain nationwide has led to stunted crops and, in dire cases, forced farmers to abandon fields. Ranchers have had sell their livestock sooner than they expected and for lower prices since the feed crops upon which the animals depend also are affected.
Livestock sale tax troubles: While all this has been a pocketbook pain for us consumers, it's also been a major financial and tax problem for cattle ranchers and others whose livelihoods depend on raising animals for market.
By selling the animals, they triggered potential capital gains taxes. But the Internal Revenue Service is offering some livestock owners relief.
The agency late last month reminded eligible farmers and ranchers forced to sell livestock due to drought that they may have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales.
The extension of an additional year applies to eligible farmers and ranchers who qualified for the four-year, instead of two-year, replacement period, if they are in a region listed by the National Drought Mitigation Center as suffering exceptional, extreme, or severe drought conditions during any week between Sept. 1, 2022, and Aug. 31, 2023.
The four-year replacement period means that the extension impacts drought sales that occurred during 2019. The replacement periods for some drought sales before 2019 are also affected due to previous drought-related extensions affecting some of these localities.
Due to the drought tax year time shifting, eligible farmers and ranchers whose drought-sale replacement period was scheduled to expire on Dec. 31, 2023, now have, in most cases, until the end of the 2024 tax year to replace the sold livestock.
The IRS points out that this 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, do not qualify.
And the tax agency notes that it might further extend this replacement period if the drought continues. The way things are going, at least here in Texas, looks likely.
Almost all states, and more locales, affected: Because of the extent of the drought, the extension applies to 49 states. That count, one-short of the full U.S. of A. union, earns this weekend’s By the Numbers honor.
In addition, the tax relief has been granted to ranchers and farmers in the District of Columbia, as well as in two U.S. territories and two independent nations in a Compact of Free Association with the United States.
The details of the counties or other jurisdictions that qualify for the relief are listed in IRS Notice 2023-67. More information on reporting drought sales and other farm-related tax issues can be found in IRS Publication 225, Farmer’s Tax Guide, available on IRS.gov.
And just so you don’t have to thumb through the full notice to find the missing state, here’s the scoop. It’s Alaska.
You also might find these items of interest:
- Happy Earth Day to goat farmer Donald J. Trump
- Tom Cruise plays part of Colorado rancher to net minimal property tax bill
- Artificial grass tax evasion scheme ends in real prison time for company owner
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