Thomas Tax Provision Helps Ranchers Rebuild IRS extends replacement period for ranchers buying animals after drought
September 8th, 2006 - WASHINGTON – A tax provision authored by U.S. Senator Craig Thomas giving ranchers time to rebuild their herds after drought was extended today by the Internal Revenue Service (IRS).
The IRS extended the replacement period in response to a letter from Thomas requesting the extension. (Notice 2006-82)
“Persistent drought has left little feed for livestock and it’s not currently in a producer’s best interest to rebuild their herds,” Thomas said. “Rather than requiring them to make an investment at a time of severe drought, the provision allows ranchers to re-invest when they have a better opportunity.”
“This kind of deferment will be tremendously important to producers in states suffering from the toughest drought. I know Wyoming folks have seen more than their fair share of dry conditions.”
When drought results in an area being declared eligible for assistance by the federal government, taxpayers ordinarily have four years to replace -- without recognizing a capital gain – the livestock sold because of drought.
Because of the prolonged drought in many areas of the country, the tax provision authored by Thomas provides additional time to replace livestock that was sold as a result of the drought. There are stipulations in Notice 2006-82 about how a taxpayer can determine whether additional time is available.
The IRS will publish a list of counties soon that experienced exceptional, extreme, or severe drought according to the U.S. Drought Monitor.
Thomas amended the Internal Revenue Code in 2004 as part of the Jobs Creation Act. The provision also allowed the Treasury Secretary authority to extend the deferment period for additional time as necessary, as the IRS has done today.
