IRS: Tax break extended for farmers forced to sell livestock due to drought

California farmers and ranchers who previously were forced to sell livestock due to the drought have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales.

The Internal Revenue Service said Wednesday they would extend the replacement period by a year.

The one-year extension of the replacement period generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes due to drought. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, and poultry are not eligible.

The drought sale replacement period was scheduled to expire in December, but in most cases, they will now have until the following year. Because the normal drought sale replacement period is four years, this extension immediately impacts drought sales that occurred during 2010.

The affected counties in California include San Benito, Santa Cruz, Santa Clara and Monterey. More information is available on the IRS website.