Livestock sales forced by drought get tax break
Oklahoma farmers and ranchers who sold livestock due to the drought have been granted additional time to replace the animals and defer tax on any gains from the forced sales, the Internal Revenue Service said Tuesday.
It's the second straight year that all 77 counties qualified for potential tax breaks due to drought.
Derrell Peel, Oklahoma State University Extension Livestock Market Economist, said the current Oklahoma drought, while severe, has not been as protracted as the one that lasted much of 2011.
Oklahoma's stock of beef cows decreased 14.3 percent in 2011, from just more than 2 million to 1.73 million head, Peel said. Based on preliminary numbers, Peel said, he doesn't expect quite as large of a decrease this year.
“My sense is we have not been forced to liquidate anywhere near that level,” he said. “Part of the reason is we didn't have as many animals to begin with, and we were able to start the year with some forage.”
The IRS provided the relief to any farm located in an area listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center, during any weekly period between Sept. 1, 2011, and Aug. 31, 2012. All or parts of 43 states were included in the IRS authorization.
The IRS said farmers and ranchers who, due to drought, sell more livestock than they normally would may defer tax on the extra gains from those sales. To qualify, the livestock generally must be replaced within a four-year period. The IRS may extend this period if the drought continues, as the agency did this year.
The one-year extension of the replacement period generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes due to drought. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, and poultry are not eligible.
Don Mecoy, Business Writer