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Notice 2018-79: Extension of replacement period for livestock

Extension of replacement period for livestock

The IRS today released an advance version of Notice 2018-79 as guidance for farmers and ranchers who were forced to sell livestock on account of drought in specific counties—generally, a county designated as eligible for federal assistance plus counties contiguous to that county. The notice provides an extension of the replacement period for sales of livestock that were sold due to drought conditions (and thus to defer tax on any gains from forced sales pursuant to section 1033(e)).


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The relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry are not eligible. To qualify, the sales must be solely due to drought, flooding or other severe weather causing the region to be designated as eligible for federal assistance. Under these circumstances, livestock generally must be replaced within a four-year period—instead of the usual two-year period. In addition, the IRS is authorized to further extend this replacement period if the drought continues. The one-year extension, announced today, gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock. Details, including an example, are provided in Notice 2006-82 [PDF 23 KB].

Notice 2006-82 announced that the IRS would publish in September of each year a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Taxpayers may use this list to determine whether they qualify for a four-year replacement period for livestock sold or exchanged on account of drought and whose replacement period is scheduled to expire at the end of 2018 (or for a fiscal year taxpayer, at the end of the tax year that includes August 31, 2018). 

Notice 2018-79 [PDF 41 KB] provides this year’s list of counties in an appendix.


For more information, contact KPMG’s National Director of Cooperative Tax Services:

David Antoni | +1 (267) 256-1627 |


Or Associate National Director of KPMG’s Cooperative Tax Services:

Brett Huston | +1 (916) 554-1654 |

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