Extended Relief for Livestock Producers Affected by Drought
The IRS issues Notice 2025-52 listing counties for relief
We know currently that many livestock producers had to sell extra livestock due to drought over the last few years. The Tax Code allows ranchers to defer the gain on these sales and gives them at least two years to reinvest into replacement livestock.
The normal period under Section 1033 to replace assets sold due to drought or other qualifying events is normally two years after the year of sale. However, Congress provided additional Code Sections that allow ranchers four years after the year of sale. If drought conditions continue, then the rancher has additional time to sell until that drought finally disappears.
Each year the IRS issues a notice listing those counties. If your ranch operation county or any contiguous county is listed in the notice, then you have an additional year to find replacement livestock to defer the gain on the sale.
This is not a free lunch since the deferred gain reduces the amount of deduction you can take on the purchase of livestock. Also, the gain on selling raised livestock is usually taxed as capital gains and is not subject to self-employment tax.
The rancher will have a drought-free year if it meets the following criteria:
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