IRS announces extension of tax relief for farmers and ranchers affected by drought

The Internal Revenue Service on September 15th issued guidance that provides an extension of tax relief for farmers and ranchers in most states and other regions who sold or exchanged livestock because of drought conditions. Under the guidance, those affected may take more time to replace their livestock and defer tax on any gains from the forced sales or exchanges.

Eligible farmers and ranchers must show that drought prompted the sales or exchanges, and that the area received a federal drought designation. The IRS is authorized to further extend this replacement period if the drought persists. The IRS provides this extension to eligible farmers and ranchers if the applicable region is listed as suffering exceptional, extreme or severe drought conditions during any week between Sept. 1, 2025, and Aug. 31, 2026.

Details and an example of how this provision works can be found in Notice 2006-82, available on IRS.gov.