IR-2022-166, September 28, 2022
WASHINGTON — The Inner Income Service is reminding farmers and ranchers in relevant areas pressured to promote livestock due to drought circumstances that they could have extra time to exchange their livestock and defer tax on any beneficial properties from the pressured gross sales.
Right now, the IRS posted Notice 2022-43 itemizing the relevant areas, a county or different jurisdiction, designated as eligible for federal help on IRS.gov. This consists of 44 states, two U.S. Territories and two impartial nations in a Compact of Free Affiliation with the USA. The reduction typically applies to capital beneficial properties realized by eligible farmers and ranchers on gross sales of livestock held for draft, dairy or breeding functions. Gross sales of different livestock, resembling these raised for slaughter or held for sporting functions, or poultry, will not be eligible.
The gross sales have to be solely as a consequence of drought, inflicting an space to be designated as eligible for federal help. Livestock typically have to be changed inside a four-year interval, as a substitute of the standard two-year interval. The IRS is allowed to additional lengthen this substitute interval if the drought continues.
The one-year extension, introduced within the discover, offers eligible farmers and ranchers till the top of their first tax yr after the primary drought-free yr to exchange the offered livestock. Particulars, together with an instance of how this provision works, might be present in Notice 2006-82.
The IRS supplies this extension to eligible farmers and ranchers that certified for the four-year substitute interval, if the relevant area is listed as struggling distinctive, excessive or extreme drought circumstances throughout any week between September 1, 2021, and August 31, 2022. This willpower is made by the National Drought Mitigation Center.
In consequence, eligible farmers and ranchers whose drought-sale substitute interval was scheduled to run out on December 31, 2022, typically now have till the top of their subsequent tax yr to exchange the offered livestock. As a result of the conventional drought-sale substitute interval is 4 years, this extension impacts drought gross sales that occurred throughout 2018. The substitute intervals for some drought gross sales earlier than 2018 are additionally affected as a consequence of earlier drought-related extensions affecting a few of these localities.
Extra data on reporting drought gross sales and different farm-related tax points might be present in Publication 225, Farmer’s Tax Guide, out there on IRS.gov.