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Extension > Extreme Weather > Prepare for floods > Weather-related livestock sales

Weather-related livestock sales

Livestock sales resulting from adverse weather conditions may be deferrable. The following discussion explains how various categories of livestock may be deferred. Always consult with your tax advisor to evaluate your individual situation.

If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the sale of additional animals until the following year. The taxpayer must meet all the following conditions to quality:1

  1. Your principal trade or business is farming.
  2. You use the cash method of accounting.
  3. You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition.
  4. The weather-related condition caused an area to be designated as eligible for assistance by the Federal government (Declared Federal Disaster Area).

Deferring livestock sales of animals not raised for breeding stock will only defer the sale into the following tax period (tax year). If your farming operation meets the above criteria, recognized gain resulting from sales of breeding livestock may also be postponed.

Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. This designation can be made by the President, the U.S. Department of Agriculture, or by other federal departments or agencies.

Remember that the rules for deferral or postponing income due to disaster declaration are complicated. Always consult with your tax advisor to evaluate your options.

12010 Farmers Tax Guide (Publication 225). p. 8. www.irs.gov


Publication References:

National Income Tax Workbook 2008 – 2010
Land Grant University Tax Education Foundation, Inc.
College Station, TX www.taxworkbook.com

2010 Farmers Tax Guide (Publication 225) www.irs.gov

 

Author: C. Robert Holcomb, EA, Extension Educator, University of Minnesota Extension (2011)

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