Farm Talk

Area Farm & Ranch News

August 16, 2011

Income tax relief for drought sale of livestock

Parsons, Kansas — If you have sold more livestock than normal due to the drought or other weather related conditions, there are a couple of income tax provisions that may provide some relief. Each provision may allow a producer to reduce the tax consequences of bunching of income if certain conditions are met. The following information is general in nature. For a more detailed discussion of the rules, reporting requirements, and examples, get a copy of the OSU Extension publication (AGEC-788: Tax Consequences of Weather-Related Sale of Livestock) available at your local county Extension office or online at www.beefextension.com in the drought information area.

The first, applies to a producer who has sold more livestock than normal due to the adverse weather. The income from the animals which were sold that were in excess of normal sales may be postponed until the following tax year when the income would have normally been recognized. However certain conditions must be met. The weather related condition must have caused the area to receive a “presidential disaster declaration”. In addition the producer's principal business must be farming and use the cash method of accounting. The producer must show that the livestock would normally have been sold in the following year. The weather-related conditions caused an area to be declared a disaster area must have caused the sale of livestock. This provision applies to any livestock sold in excess of normal due to weather related conditions. [Refer to IRS Code Section 451(e)]

The second provision only applies to breeding, dairy, or draft animals that were sold in excess of normal. For the animals sold in excess of normal, a producer may elect to replace the animals sold, within a two year period, with like animals and thus defer the recognition of income until the new animals are sold. Unlike the first rule, there is no need for a disaster declaration, all that is needed is proof that drought conditions existed which caused the sale of additional animals. However if an area has received a presidential disaster declaration, the replacement period is four years not two.

The replacement animals must be for the same use as the animals sold. For example, a producer must replace dairy cows with dairy cows or breeding cows with breeding cows. In addition if, for example, the excess animals were sold for $10,000, the producer will need to buy $10,000 or more of replacements to completely defer the gain from the sale. If only $8,000 is spent on the new animals then $2,000 must be recaptured on amended tax return and the tax paid. There is no requirement as to how long the animals were held by the taxpayer in order to receive this treatment, but the producer must provide evidence of the weather condition and a calculation of the gain for each number and kind of animal sold. [Refer to IRS Code Section 1033(e)]

This is only a brief discussion of the rules that apply to weather related sales of livestock. Please consult your tax preparer or advisor for additional information concerning the income tax implications that would apply to your specific business situation.

1
Text Only
Area Farm & Ranch News
  • henbit.jpg Cool weather slows weed burndown

    Weed control at spring planting, an increasing challenge with herbicide-resistant weeds, presents extra concerns when temperatures stay low, day and night. Weather bears watching more than usual.

    April 22, 2014 1 Photo

  • Farm bill brings questions for producers

    As a professor in Kansas State University's Department of Agricultural Economics, Art Barnaby has given countless presentations and fielded even more questions about managing risk over the years. And the questions continue as details of the new farm bill unfold.

    April 15, 2014

  • sericea.jpg Controlling weeds and brush in pastures

    I’ve always wondered about the saying “The grass is always greener on the other side of the fence”. That may be true, but what about the weeds and brush on that side of the fence, are they greener too? Spring has arrived, and along with it, the time has come to start thinking about weed and brush control in our range and pasture land.

    April 8, 2014 1 Photo

  • PEDV concerns send futures soaring

    Uncertainty surrounding total swine herd losses to porcine epidemic diarrhea virus has sent lean hog futures for spring and summer contracts to record-high levels, but it's possible the markets have overreacted, a Purdue Extension agricultural economist says.
    PEDV is a virus of swine that is fatal to nearly 100 percent of infected piglets that are less than 2 weeks old. There is no vaccination or treatment for the disease, which poses no threat to human health or food safety.

    March 25, 2014

  • PED virus spreading rapidly on Missouri farms

    A fast-spreading virus that can kill 80 percent of piglets that contract it is rapidly spreading across Missouri hog farms, wiping out entire nurseries in some cases.
    Porcine epidemic diarrhea has killed 4 million to 5 million pigs nationwide, or about 4 percent of the pigs that would go to market later this year.

    March 18, 2014

  • Invasive species conference set March 25, OKC

    We have all had unwanted and even uninvited guests overstay their welcome in our homes. That anxious feeling of wanting those people to leave without knowing how to ask is all too familiar.
    It is a similar feeling many property owners in Oklahoma are experiencing with invasive species of insects, plants and animals. The Oklahoma Cooperative Extension Service is hosting the Oklahoma Invasive Species Conference March 25 to discuss this issue.

    March 11, 2014

  • Debbie_Blythe2.jpg Morris Co. woman advocates for agriculture

    When Debbie Lyons-Blythe tells her story, there’s no question about authenticity — she is a cattlewoman-farm mom.
    And, she’s the 2012 America’s Farmers Mom of the Year.
    The White City, Kan., farm advocate kept 210 attendees’ complete attention during the 580 WIBW Farm Profit Conference last week at Paxico.

    March 4, 2014 2 Photos

  • soybean-auger.jpg Check tax laws on deferred grain sales

    Grain producers using a calendar tax year and the cash method of accounting often use deferred payment contracts to defer payment of grain sales into the following tax year.

    February 25, 2014 1 Photo

  • Manure Expo to be held in Springfield

    The North American Manure Expo has always been about showcasing manure management and application equipment and educating farmers and custom applicators on managing and applying manure. Now it’s time for manufacturers to show-off their equipment and latest inventions in the Show-Me State.

    February 18, 2014

  • MU-Eldon-Cole.jpg Eldon Cole honored for 50 years with Extension

    Back in 1964, Cassius Clay beat Sonny Liston for the World Heavyweight championship, the first Ford Mustang came off the assembly line, the 24th Amendment to the Constitution of the United States was ratified, President Johnson signed the Civil Rights Act, the Beatles made their first appearance on the Ed Sullivan show and Eldon Cole began his career with University of Missouri Extension.

    February 11, 2014 1 Photo

Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Seasonal Content