This article is a follow up to last month’s Crop Insurance Deferral Considerations as we now turn our attention to options available should farmers find themselves in the unfortunate situation of having to sell livestock due to extreme weather conditions.
Livestock sold due to weather related conditions
Farmers forced to sell livestock early to floods, drought, or other adverse weather conditions have two options:
1.They may elect to include income from the sale of the additional livestock in the following tax year, or 2. Deem the forced sale as an involuntary conversion.
For option one, as prescribed by Internal Revenue Code Section 451, the following conditions are required:
- The farmer uses cash method of accounting,
- The farmer can establish that the sale would have occurred but for the weather-related event, and
- The weather event resulted in designation of that area (where the livestock resided or where the feed is normally obtained) as eligible for federal assistance.