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600 E. Boulevard Ave.
  Bismarck, ND 58505-0599
  701.328.7088 phone
  701.328.3700 fax
  877.328.7088 toll-free
FOR IMMEDIATE RELEASE Contact: Cory Fong, Tax Commissioner, 701-328-2770
Tuesday, October 18, 2006  

Replacement Period Extended for Farmers Selling Livestock Due to Drought

BISMARCK, N.D. – Tax Commissioner Cory Fong today reminded livestock producers affected by the severe drought conditions that the IRS has granted additional time for farmers to purchase replacement livestock to qualify for the deferral of gain on the sale of livestock because of drought.

“The extremely dry weather conditions from earlier this year have created real hardships for farmers and ranchers and has been devastating for farm families,” said Fong. “This latest move by the IRS provides some good news that will help ease the financial burden come tax time.”

Because of the intense, prolonged drought, the IRS is granting additional time for producers to replace livestock sold because of drought. Current law allows a 4-year period in which to replace livestock sold because of drought without recognizing a taxable gain. This period is now extended until the end of the tax year following the first drought-free year in the region where the drought conditions existed that caused the livestock sell-off. The “region” is the county in which the drought occurred and the neighboring counties. The “first drought-free year” refers to a 12-month period ending on August 31 during which there was no weekly period for which exceptional, extreme, or severe drought conditions are reported for the region.

“In order to get the best advice about their tax reporting options, farmers should visit with a tax practitioner knowledgeable about farm tax laws and assistance programs,” said Fong.

The IRS announced the relief in Notice 2006-82. The IRS, with the help of the National Drought Mitigation Center, will publish in September of each year a list of counties in which exceptional, extreme, or severe drought conditions existed during the 12-month period ending on August 31.

In its first notice issued in September 2006, Notice 2006-91, the IRS identified the following counties in North Dakota as having exceptional, extreme, or severe drought during the 12-month period ending on August 31, 2006: Adams, Barnes, Benson, Billings, Bottineau, Bowman, Burke, Burleigh, Cass, Cavalier, Dickey, Divide, Dunn, Eddy, Emmons, Foster, Golden Valley, Grand Forks, Grant, Griggs, Hettinger, Kidder, LaMoure, Logan, McHenry, McIntosh, McKenzie, McLean, Mercer, Morton, Mountrail, Nelson, Oliver, Pembina, Pierce, Ramsey, Ransom, Renville, Richland, Rolette, Sargent, Sheridan, Sioux, Slope, Stark, Steele, Stutsman, Towner, Traill, Walsh, Ward, Wells, and Williams.

For taxpayers whose 4-year replacement period is scheduled to expire on December 31, 2006, their replacement period is extended if their livestock sale was attributable to drought in a county on this list or to drought in a county contiguous to a county on the list. The extension continues until the end of the tax year following the first drought-free year in the region where the drought conditions existed that caused the livestock sell-off.

“This IRS action provides much needed relief for our producers,” said Fong. “It will help producers who have already been forced to sell off herds as well as those currently facing liquidation as a result of drought.”

For more information, farmers and ranchers are encouraged to check out IRS Notices 2006-82 and 2006-91 on the IRS web site at http://www.irs.gov, or consult with a tax professional knowledgeable in farm tax matters. Drought related information is available on the University of Nebraska-Lincoln’s National Drought Migration Center’s web site at http://www.drought.unl.edu/. The U.S. Drought Monitor Maps are available online at: http://www.drought.unl.edu/dm/archive.html and http://www.drought.unl.edu/dm/monitor.html.

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