Farmers and ranchers who were forced to sell livestock due to drought may get extra time to replace the livestock and defer tax on any gains from the forced sales. Here are some facts about this to help farmers understand how the deferral works and if they are eligible.
- The one-year extension gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock.
- The farmer or rancher must be in an applicable region. An applicable region is a county designated as eligible for federal assistance, as well as counties contiguous to that county.
- The farmer’s county, parish, city or district included in the applicable region must be listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center. All or part of 36 states and one U.S. territory are listed. The list of applicable regions is in Notice 2021-55 on IRS.gov.