California farmers and ranchers who have been forced to sell livestock due to the ongoing drought may be eligible for tax relief, according to the Internal Revenue Service.
The IRS said those who are eligible have an additional year to replace livestock and defer tax on any gains from the forced sales, according to a news release from the federal agency.
Area counties affected include Yuba, Sutter and Colusa counties.
To qualify for relief, farmers or ranchers must have sold livestock because of drought conditions in any applicable region -- this is a county or other jurisdiction designated as eligible for federal assistance plus counties contiguous to it.
The relief provided by the IRS applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry, are not eligible, according to the release.
Eligible farmers and ranchers whose drought-sale replacement period was scheduled to expire on Dec. 31, will now have until the end of their next tax year to replace the sold livestock. Because the normal drought-sale replacement period is four years, this extension impacts drought sales that occurred during 2017, the release said.
More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, Farmer’s Tax Guide, on IRS.gov.