September 15, 2006

Tax break extended for US cattle producers

Capital gains taxes for US cattle producers in drought areas who are forced to sell animals would be waived for a year after the drought conditions end, the Internal Revenue Service (IRS) announced.

Furthermore, if a rancher in the drought area replaces an animal during this period, there would be no tax liability, the IRS said.

Previous US laws give cattlemen four years to replace the livestock sold because of drought without recognizing a capital gain. The law was set to expire this year.

US Treasury Secretary Henry Paulson last week extended the provision for an additional year for areas under severe drought.

National Cattlemen's Beef Association spokesman Joe Schuele said the move allows more time for cattlemen to make buying decisions when conditions improve.

The extension could apply to ranchers in at least 20 states including Texas, the nation's leading cattle producer.

Ranchers have been scaling down their herds for the past few months due to the shortage of available feed materials. Losses from July alone amounted to US$1.6 billion in the livestock industry.