n-09-81.pdf

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Part III - Administrative, Procedural, and Miscellaneous

Extension of Replacement Period for Livestock Sold on Account of Drought in Specified
Counties

Notice 2009-81

SECTION 1. PURPOSE
This notice provides guidance regarding an extension of the replacement period
under § 1033(e) of the Internal Revenue Code for livestock sold on account of drought
in specified counties.
SECTION 2. BACKGROUND
.01 Nonrecognition of Gain on Involuntary Conversion of Livestock
. Section
1033(a) generally provides for nonrecognition of gain when property is involuntarily
converted and replaced with property that is similar or related in service or use. Section
1033(e)(1) provides that a sale or exchange of livestock (other than poultry) held by a
taxpayer for draft, breeding, or dairy purposes in excess of the number that would be
sold following the taxpayer’s usual business practices is treated as an involuntary
conversion if the livestock is sold or exchanged solely on account of drought, flood, or
other weather-related conditions.
.02 Replacement Period
. Section 1033(a)(2)(A) generally provides that gain from
an involuntary conversion is recognized only to the extent the amount realized on the
conversion exceeds the cost of replacement property purchased during the replacement
period. If a sale or exchange of livestock is treated as an involuntary conversion under

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§ 1033(e)(1) and is solely on account of drought, flood, or other weather-related
conditions that result in the area being designated as eligible for assistance by the
federal government, § 1033(e)(2)(A) provides that the replacement period ends four
years after the close of the first taxable year in which any part of the gain from the
conversion is realized. Section 1033(e)(2)(B) provides that the Secretary may extend
this replacement period on a regional basis for such additional time as the Secretary
determines appropriate if the weather-related conditions that resulted in the area being
designated as eligible for assistance by the federal government continue for more than
three years. Section 1033(e)(2) is effective for any taxable year with respect to which
the due date (without regard to extensions) for a taxpayer’s return is after December 31,
2002.
SECTION 3. EXTENSION OF REPLACEMENT PERIOD UNDER § 1033(e)(2)(B)
Notice 2006-82, 2006-2 C.B. 529, provides for extensions of the replacement
period under § 1033(e)(2)(B). If a sale or exchange of livestock is treated as an
involuntary conversion on account of drought and the taxpayer’s replacement period is
determined under § 1033(e)(2)(A), the replacement period will be extended under
§ 1033(e)(2)(B) and Notice 2006-82 until the end of the taxpayer’s first taxable year
ending after the first drought-free year for the applicable region. For this purpose, the
first drought-free year for the applicable region is the first 12-month period that (1) ends
August 31; (2) ends in or after the last year of the taxpayer’s 4-year replacement period
determined under § 1033(e)(2)(A); and (3) does not include any weekly period for which
exceptional, extreme, or severe drought is reported for any location in the applicable
region. The applicable region is the county that experienced the drought conditions on

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account of which the livestock was sold or exchanged and all counties that are
contiguous to that county.
A taxpayer may determine whether exceptional, extreme, or severe drought is
reported for any location in the applicable region by reference to U.S. Drought Monitor
maps that are produced on a weekly basis by the National Drought Mitigation Center.
U.S. Drought Monitor maps are archived at www.drought.unl.edu/dm/archive.html.
In addition, Notice 2006-82 provides that the Internal Revenue Service will
publish in September of each year a list of counties, districts, cities, or parishes
(hereinafter “counties”) for which exceptional, extreme, or severe drought was reported
during the preceding 12 months. Taxpayers may use this list instead of U.S. Drought
Monitor maps to determine whether exceptional, extreme, or severe drought has been
reported for any location in the applicable region.
The Appendix to this notice contains the list of counties for which exceptional,
extreme, or severe drought was reported during the 12-month period ending August 31,
2009. Under Notice 2006-82, the 12-month period ending on August 31, 2009, is not a
drought-free year for an applicable region that includes any county on this list.
Accordingly, for a taxpayer who qualified 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 2009 (or, in the case of a fiscal year taxpayer, at the end of the
taxable year that includes August 31, 2009), the replacement period will be extended
under § 1033(e)(2) and Notice 2006-82 if the applicable region includes any county on
this list. This extension will continue until the end of the taxpayer’s first taxable year
ending after a drought-free year for the applicable region.

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SECTION 4. DRAFTING INFORMATION
The principal author of this notice is Seoyeon Park of the Office of Associate
Chief Counsel (Income Tax and Accounting). For further information regarding this
notice contact Ms. Park at (202) 622-4960 (not a toll-free call).
APPENDIX
Alabama
Counties of Calhoun, Chambers, Cherokee, Cleburne, DeKalb, Jackson, Lee, Madison,
Randolph, Russell.
California
Counties of Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, Del
Norte, El Dorado, Fresno, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen,
Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Mono, Monterey,
Napa, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San
Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo,
Santa Barbara, Santa Clara, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma,
Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Ventura, Yolo, Yuba.
Colorado
Counties of Baca, Bent, Las Animas, Prowers.
Florida
Counties of Alachua, Brevard, Broward, Charlotte, Citrus, Collier, DeSoto, Flagler,
Glades, Hardee, Hendry, Hernando, Highlands, Hillsborough, Indian River, Lake, Lee,
Levy, Manatee, Marion, Martin, Miami-Dade, Monroe, Okeechobee, Orange, Osceola,
Palm Beach, Pasco, Pinellas, Polk, Putnam, St. Johns, St. Lucie, Sarasota, Seminole,
Sumter, Volusia.
Georgia
Counties of Appling, Baldwin, Banks, Barrow, Bartow, Ben Hill, Bibb, Bleckley, Bulloch,
Burke, Butts, Candler, Carroll, Catoosa, Chattahoochee, Chattooga, Cherokee, Clarke,
Clayton, Cobb, Coffee, Columbia, Coweta, Crawford, Crisp, Dade, Dawson, DeKalb,
Dodge, Dooly, Douglas, Elbert, Emanuel, Fannin, Fayette, Floyd, Forsyth, Franklin,
Fulton, Gilmer, Glascock, Gordon, Greene, Gwinnett, Habersham, Hall, Hancock,
Haralson, Harris, Hart, Heard, Henry, Houston, Irwin, Jackson, Jasper, Jeff Davis,
Jefferson, Jenkins, Johnson, Jones, Lamar, Laurens, Lincoln, Lumpkin, McDuffie,
Macon, Madison, Marion, Meriwether, Monroe, Montgomery, Morgan, Murray,
Muscogee, Newton, Oconee, Oglethorpe, Paulding, Peach, Pickens, Pike, Polk,

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Pulaski, Putnam, Rabun, Richmond, Rockdale, Schley, Screven, Spalding, Stephens,
Stewart, Sumter, Talbot, Taliaferro, Tattnall, Taylor, Telfair, Toombs, Towns, Treutlen,
Troup, Twiggs, Union, Upson, Walker, Walton, Warren, Washington, Webster, Wheeler,
White, Whitfield, Wilcox, Wilkes, Wilkinson.
Hawaii
Counties of Hawaii, Honolulu, Kauai, Maui.
Kansas
Counties of Barber, Clark, Comanche, Hamilton, Meade, Morton, Seward, Stanton,
Stevens.
Kentucky
Counties of Adair, Allen, Anderson, Barren, Bath, Bell, Bourbon, Boyle, Breathitt, Butler,
Calloway, Carter, Casey, Christian, Clark, Clay, Clinton, Cumberland, Edmonson,
Elliott, Estill, Fayette, Fleming, Floyd, Franklin, Garrard, Grayson, Green, Hardin,
Harlan, Harrison, Hart, Jackson, Jessamine, Johnson, Knott, Knox, Larue, Laurel,
Lawrence, Lee, Leslie, Letcher, Lincoln, Logan, McCreary, Madison, Magoffin, Marion,
Martin, Menifee, Mercer, Metcalfe, Monroe, Montgomery, Morgan, Muhlenberg, Nelson,
Nicholas, Owsley, Perry, Pike, Powell, Pulaski, Rockcastle, Rowan, Russell, Scott,
Shelby, Simpson, Spencer, Taylor, Todd, Trigg, Warren, Washington, Wayne, Whitley,
Wolfe, Woodford.
Louisiana
Parishes of Assumption, Lafourche, St. Martin, St. Mary, Terrebonne.
Michigan
Counties of Delta, Dickinson, Gogebic, Houghton, Iron, Marquette, Menominee,
Ontonagon.
Minnesota
Counties of Aitkin, Anoka, Blue Earth, Carlton, Carver, Cass, Chisago, Crow Wing,
Dakota, Dodge, Faribault, Fillmore, Freeborn, Goodhue, Hennepin, Houston, Isanti,
Itasca, Kanabec, Le Sueur, Martin, Olmsted, Pine, Ramsey, Rice, Scott, Sherburne,
Sibley, Wabasha, Waseca, Washington, Watonwan, Winona, Wright.
Montana
Counties of Cascade, Custer, Daniels, Dawson, Fallon, Flathead, Glacier, Lake, Lewis
and Clark, Liberty, Lincoln, McCone, Pondera, Prairie, Richland, Roosevelt, Sanders,

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Sheridan, Teton, Toole, Valley, Wibaux.
Nevada
Carson City. Counties of Churchill, Douglas, Elko, Eureka, Humboldt, Lander, Lincoln,
Lyon, Nye, Pershing, Storey, Washoe, White Pine.
New Mexico
Counties of Chaves, DeBaca, Dona Ana, Eddy, Guadalupe, Lea, Lincoln, Luna, Otero,
Roosevelt, Sierra, Socorro, Torrance, Union.
North Carolina
Counties of Alexander, Alleghany, Ashe, Avery, Bertie, Buncombe, Burke, Cabarrus,
Caldwell, Camden, Catawba, Cherokee, Chowan, Clay, Cleveland, Currituck, Dare,
Edgecombe, Gaston, Gates, Graham, Greene, Halifax, Haywood, Henderson, Hertford,
Iredell, Jackson, Lincoln, McDowell, Macon, Madison, Martin, Mecklenburg, Mitchell,
Nash, Northampton, Pasquotank, Perquimans, Pitt, Polk, Rowan, Rutherford, Swain,
Transylvania, Vance, Warren, Watauga, Wayne, Wilkes, Wilson, Yadkin, Yancey.
North Dakota
Counties of Adams, Billings, Bowman, Burke, Divide, Dunn, Golden Valley, Grant,
Hettinger, McKenzie, McLean, Mercer, Morton, Mountrail, Oliver, Slope, Stark, Ward,
Williams.
Oklahoma
Counties of Alfalfa, Atoka, Beaver, Beckham, Blaine, Bryan, Caddo, Carter, Choctaw,
Cimarron, Coal, Comanche, Cotton, Custer, Dewey, Ellis, Garfield, Garvin, Grady,
Greer, Harmon, Harper, Hughes, Jackson, Jefferson, Johnston, Kingfisher, Kiowa,
Love, McClain, Major, Marshall, Murray, Pittsburg, Pontotoc, Roger Mills, Stephens,
Texas, Tillman, Washita, Woods, Woodward.
Oregon
Counties of Curry, Harney, Josephine, Lake.
South Carolina
Counties of Abbeville, Aiken, Allendale, Anderson, Bamberg, Barnwell, Cherokee,
Chester, Edgefield, Fairfield, Greenville, Greenwood, Lancaster, Laurens, Lexington,
McCormick, Newberry, Oconee, Orangeburg, Pickens, Richland, Saluda, Spartanburg,
Union, York.

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Tennessee
Counties of Anderson, Bedford, Benton, Bledsoe, Blount, Bradley, Campbell, Cannon,
Carter, Cheatham, Claiborne, Clay, Cocke, Coffee, Cumberland, Davidson, DeKalb,
Dickson, Fentress, Franklin, Grainger, Greene, Grundy, Hamblen, Hamilton, Hancock,
Hawkins, Henry, Houston, Humphreys, Jackson, Jefferson, Johnson, Knox, Loudon,
McMinn, Macon, Marion, Meigs, Monroe, Montgomery, Moore, Morgan, Overton,
Pickett, Polk, Putnam, Rhea, Roane, Robertson, Rutherford, Scott, Sequatchie, Sevier,
Smith, Stewart, Sullivan, Sumner, Trousdale, Unicoi, Union, Van Buren, Warren,
Washington, White, Williamson, Wilson.
Texas
Counties of Andrews, Aransas, Archer, Atascosa, Austin, Bandera, Bastrop, Baylor,
Bee, Bell, Bexar, Blanco, Borden, Bosque, Brazoria, Brazos, Brooks, Brown, Burleson,
Burnet, Caldwell, Calhoun, Callahan, Cameron, Chambers, Childress, Clay, Coke,
Coleman, Collingsworth, Colorado, Comal, Comanche, Concho, Cooke, Coryell, Cottle,
Crane, Crockett, Crosby, Culberson, Dallam, Dawson, Denton, DeWitt, Dickens,
Dimmit, Duval, Eastland, Ector, Edwards, El Paso, Erath, Falls, Fayette, Fisher, Foard,
Fort Bend, Freestone, Frio, Gaines, Galveston, Garza, Gillespie, Glasscock, Goliad,
Gonzales, Grayson, Grimes, Guadalupe, Hamilton, Hardeman, Harris, Haskell, Hays,
Hidalgo, Hill, Houston, Howard, Hudspeth, Irion, Jack, Jackson, Jeff Davis, Jim Hogg,
Jim Wells, Jones, Karnes, Kendall, Kenedy, Kent, Kerr, Kimble, King, Kinney, Kleberg,
Knox, Lampasas, La Salle, Lavaca, Lee, Leon, Liberty, Limestone, Lipscomb, Live Oak,
Llano, Loving, McCulloch, McLennan, McMullen, Madison, Martin, Mason, Matagorda,
Maverick, Medina, Menard, Midland, Milam, Mills, Mitchell, Montague, Montgomery,
Motley, Navarro, Nolan, Nueces, Palo Pinto, Parker, Polk, Presidio, Reagan, Real,
Reeves, Refugio, Robertson, Runnels, San Jacinto, San Patricio, San Saba, Schleicher,
Scurry, Shackelford, Starr, Stephens, Sterling, Stonewall, Sutton, Taylor, Throckmorton,
Tom Green, Travis, Trinity, Upton, Uvalde, Val Verde, Victoria, Walker, Waller, Ward,
Washington, Webb, Wharton, Wichita, Wilbarger, Willacy, Williamson, Wilson, Winkler,
Wise, Young, Zapata, Zavala.
Utah
Counties of Juab, Millard, Tooele.
Virginia
Cities of Bristol, Chesapeake, Emporia, Franklin, Galax, Norton, Radford, Suffolk,
Virginia Beach. Counties of Bland, Brunswick, Buchanan, Carroll, Craig, Dickenson,
Floyd, Giles, Grayson, Greensville, Isle of Wight, Lee, Mecklenburg, Montgomery,
Pulaski, Roanoke, Russell, Scott, Smyth, Southampton, Sussex, Tazewell, Washington,
Wise, Wythe.

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Washington
Counties of Chelan, Clallam, Douglas, Grant, Grays Harbor, Jefferson, Mason,
Okanogan.
West Virginia
Counties of Boone, Lincoln, Logan, McDowell, Mercer, Mingo, Monroe, Raleigh,
Summers, Wayne, Wyoming.
Wisconsin
Counties of Adams, Ashland, Barron, Bayfield, Buffalo, Burnett, Chippewa, Clark, Door,
Douglas, Dunn, Eau Claire, Florence, Forest, Iron, Jackson, Juneau, La Crosse,
Langlade, Lincoln, Marathon, Marinette, Menominee, Monroe, Oconto, Oneida,
Outagamie, Pepin, Pierce, Polk, Portage, Price, Rusk, St. Croix, Sawyer, Shawano,
Taylor, Trempealeau, Vilas, Washburn, Waupaca, Wood.
Wyoming
Counties of Fremont, Lincoln, Sublette, Sweetwater, Uinta.