IRS Approves Tax Deferral for Drought-Affected Farmers
Drought-affected Utah farmers and ranchers of draft, dairy or breeding animals received financial assistance this week through an IRS tax deferral.
Notice 2013-62 provides a year-long extension for the replacement of livestock to any farm located in an extreme drought area during any period between Sep. 1, 2012, and Aug. 31, 2013.
"This deals with Code Section 1033 and it is one of a series of code sections that allow an individual to defer capital gain when they basically exchange property," said Bill Brunson, Media Relations for the IRS.
"In this particular circumstance, if the farmer or rancher replaces like-kind property, the animals they sell due to the drought, then they will defer all the gain that they would have received on the sale of the livestock initially."
Drought conditions in Utah have persisted since 2009, forcing ranchers and farmers to pay high prices for feed to maintain their herds or sell their livestock.
Once livestock is sold, the farmers are unable to replace their herds before paying taxes on the liquidated funds, making it difficult for them to replace their herds in the spring when there is the possibility of better weather conditions.
"The reason that they’re making these extensions is that they are recognizing that it levels out so that the ranching taxable income is truly the normal income on the ranch," said Brent Tanner of the Utah Cattlemen’s Association.
The tax deferral applies all counties in Utah.
Taylor Halversen is a senior at Utah State University, majoring in Communication Studies and Liberal Arts.