Sell cattle early? Here's potential tax help
If the drought forced you to sell off cattle last year before you originally wanted or needed to, you may get a tax break this year.
Arkansas saw some of the worst of the drought in 2012, and the numbers in that state back up that point; 49% of that state's cattle producers sold more cows and 41% sold more heifers than they normally would based on water, pasture and feed shortages, according to a report from the University of Arkansas Extension.
The good news is those producers have options to keep from paying taxes that they incurred from having to sell off cattle way before they normally would have -- and at whatever market prices they faced at the time.
"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 additional animals until the next year," according to the Internal Revenue Service. "You must meet all the following conditions to qualify:
Your principal trade or business is farming.
You use the cash method of accounting.
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.
The weather-related condition caused an area to be designated as eligible for assistance by the federal government.
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. The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies."