The IRS recently posted Notice 2023-67 reminding ranchers who were forced to sell livestock due to drought may have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales.
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, are not eligible.
The sales must be solely due to drought, causing an area to be designated as eligible for federal assistance. Livestock generally must be replaced within four years instead of the usual two-year period if the applicable region is listed as suffering exceptional, extreme or severe drought conditions during any week between Sept. 1, 2022, and Aug. 31, 2023.
More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, “Farmer’s Tax Guide,” available on IRS.gov.
