n-20-74.pdf

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Extension of Replacement Period for Livestock Sold on Account of Drought

Notice 2020-74

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
§ 1033(e)(1) and is solely on account of drought, flood, or other weather-related

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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 four-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

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conditions on 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
http://droughtmonitor.unl.edu/Maps/MapArchive.aspx
.
In addition, Notice 2006-82 provides that the Internal Revenue Service will
publish in September of each year a list of counties
1
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,
2020. Under Notice 2006-82, the 12-month period ended on August 31, 2020, 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 2020 (or, in the case of a fiscal year taxpayer, at the end of the
taxable year that includes August 31, 2020), the replacement period will be extended
under § 1033(e)(2) and Notice 2006-82 if the applicable region includes any county on

1
The term “counties” in this notice includes boroughs, census areas, counties, islands, municipalities, or
parishes.

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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.
SECTION 4. DRAFTING INFORMATION
The principal author of this notice is Lewis Saideman of the Office of Associate Chief
Counsel (Income Tax & Accounting). For further information regarding this notice, please
contact Mr. Saideman at (202) 317-7006 (not a toll-free call).
APPENDIX

Alabama

Counties of Autauga, Baldwin, Barbour, Bibb, Bullock, Butler, Chambers, Cherokee,
Chilton, Clay, Coffee, Conecuh, Coosa, Covington, Crenshaw, Dale, Dallas, DeKalb,
Elmore, Escambia, Geneva, Henry, Houston, Jackson, Jefferson, Lee, Limestone,
Lowndes, Macon, Madison, Marshall, Mobile, Montgomery, Pike, Randolph, Russell,
Shelby, Talladega, and Tallapoosa.

Alaska

Municipality of Anchorage. Boroughs of Kenai Peninsula, Ketchikan Gateway, Kodiak
Island, Lake and Peninsula, and Matanuska-Susitna. Census Areas of Prince of Wales-
Outer Ketchikan, Valdez-Cordova, and Wrangell-Petersburg.

Arizona

Counties of Apache, Cochise, Coconino, Gila, Graham, Greenlee, La Paz, Maricopa,
Mohave, Navajo, Pima, Pinal, Santa Cruz, and Yavapai.

Arkansas

Counties of Ashley, Bradley, Calhoun, Columbia, Lafayette, Miller, Nevada, Ouachita, and
Union.

California

Counties of Alameda, Butte, Colusa, Contra Costa, Del Norte, Glenn, Humboldt, Lake,
Lassen, Marin, Mendocino, Modoc, Napa, Nevada, Placer, Plumas, Sacramento, San
Bernardino, San Francisco, San Joaquin, San Mateo, Santa Clara, Shasta, Sierra,

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Siskiyou, Solano, Sonoma, Sutter, Tehama, Trinity, Yolo, and Yuba.

Colorado

Counties of Adams, Alamosa, Arapahoe, Archuleta, Baca, Bent, Boulder, Broomfield,
Chaffee, Cheyenne, Clear Creek, Conejos, Costilla, Crowley, Custer, Delta, Denver,
Dolores, Douglas, Eagle, Elbert, El Paso, Fremont, Garfield, Gilpin, Grand, Gunnison,
Hinsdale, Huerfano, Jackson, Jefferson, Kiowa, Kit Carson, Lake, La Plata, Larimer, Las
Animas, Lincoln, Logan, Mesa, Mineral, Moffat, Montezuma, Montrose, Morgan, Otero,
Ouray, Park, Phillips, Pitkin, Prowers, Pueblo, Rio Blanco, Rio Grande, Routt, Saguache,
San Juan, San Miguel, Sedgwick, Summit, Teller, Washington, Weld, and Yuma.

Connecticut

Counties of Hartford, Litchfield, Middlesex, New Haven, New London, Tolland, and
Windham.

Delaware

Counties of Kent and New Castle.

District of Columbia

District of Columbia.

Florida

Counties of Alachua, Baker, Bay, Bradford, Broward, Calhoun, Charlotte, Citrus, Clay,
Collier, Columbia, Duval, Escambia, Flagler, Franklin, Gadsden, Glades, Gulf, Hamilton,
Hardee, Hendry, Hernando, Hillsborough, Holmes, Jackson, Jefferson, Lake, Lee, Leon,
Levy, Liberty, Madison, Manatee, Marion, Miami-Dade, Monroe, Nassau, Okaloosa,
Orange, Pasco, Pinellas, Polk, Putnam, Saint Johns, Santa Rosa, Sarasota, Seminole,
Sumter, Suwannee, Taylor, Union, Volusia, Wakulla, Walton, and Washington.

Georgia

Counties of Appling, Atkinson, Bacon, Baker, Baldwin, Banks, Barrow, Bartow, Ben Hill,
Berrien, Bibb, Bleckley, Brantley, Brooks, Bryan, Bulloch, Burke, Butts, Calhoun, Camden,
Candler, Carroll, Catoosa, Charlton, Chatham, Chattahoochee, Chattooga, Cherokee,
Clarke, Clay, Clayton, Clinch, Cobb, Coffee, Colquitt, Columbia, Cook, Coweta, Crawford,
Crisp, Dade, Dawson, Decatur, DeKalb, Dodge, Dooly, Dougherty, Douglas, Early, Echols,
Effingham, Elbert, Evans, Fannin, Fayette, Floyd, Forsyth, Franklin, Fulton, Gilmer,
Glascock, Gordon, Grady, Greene, Gwinnett, Habersham, Hall, Hancock, Harris, Hart,
Heard, Henry, Houston, Irwin, Jackson, Jasper, Jeff Davis, Jefferson, Jenkins, Johnson,
Jones, Lamar, Lanier, Laurens, Lee, Liberty, Lincoln, Long, Lowndes, Lumpkin, McDuffie,
Macon, Madison, Marion, Meriwether, Miller, Mitchell, Monroe, Montgomery, Morgan,

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Murray, Muscogee, Newton, Oconee, Oglethorpe, Paulding, Peach, Pickens, Pierce, Pike,
Polk, Pulaski, Putnam, Quitman, Rabun, Randolph, Rockdale, Schley, Screven, Seminole,
Spalding, Stephens, Stewart, Sumter, Talbot, Taliaferro, Tattnall, Taylor, Telfair, Terrell,
Thomas, Tift, Toombs, Towns, Treutlen, Troup, Turner, Twiggs, Union, Upson, Walker,
Walton, Ware, Warren, Washington, Wayne, Webster, Wheeler, White, Whitfield, Wilcox,
Wilkes, Wilkinson, and Worth.

Hawaii

Counties of Hawaii, Kalawao, and Maui.

Idaho

Counties of Blaine, Butte, Camas, and Custer.

Illinois

Counties of Gallatin, Hardin, and White.

Indiana

Counties of Clark, Crawford, Dubois, Floyd, Harrison, Jefferson, Perry, Posey, Scott,
Spencer, Switzerland, Vanderburgh, and Warrick.

Iowa

Counties of Adair, Adams, Audubon, Benton, Boone, Buena Vista, Calhoun, Carroll, Cass,
Cherokee, Clay, Crawford, Dallas, Emmet, Franklin, Greene, Grundy, Guthrie, Hamilton,
Hardin, Harrison, Humboldt, Ida, Iowa, Jasper, Keokuk, Kossuth, Lyon, Madison, Mahaska,
Marshall, Mills, Monona, Montgomery, O'Brien, Palo Alto, Plymouth, Pocahontas, Polk,
Pottawattamie, Poweshiek, Sac, Shelby, Sioux, Story, Tama, Warren, Webster, Woodbury,
and Wright.

Kansas

Counties of Cheyenne, Clark, Ellis, Finney, Gove, Grant, Gray, Greeley, Hamilton, Harvey,
Haskell, Hodgeman, Kearny, Kingman, Lane, Logan, McPherson, Marion, Meade, Morton,
Ness, Pawnee, Rawlins, Reno, Rush, Scott, Sedgwick, Seward, Sherman, Stanton,
Stevens, Trego, Wallace, and Wichita.

Kentucky

Counties of Adair, Barren, Bell, Bourbon, Boyle, Breathitt, Breckinridge, Bullitt, Butler,
Carroll, Casey, Christian, Clark, Clay, Clinton, Crittenden, Cumberland, Daviess,
Edmonson, Estill, Fayette, Floyd, Gallatin, Garrard, Grayson, Green, Hancock, Hardin,
Harlan, Hart, Henderson, Henry, Hopkins, Jackson, Jefferson, Jessamine, Johnson, Knott,

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Knox, Larue, Laurel, Lawrence, Lee, Leslie, Letcher, Lincoln, Logan, McCreary, McLean,
Madison, Magoffin, Marion, Martin, Meade, Menifee, Mercer, Metcalfe, Monroe, Morgan,
Muhlenberg, Nelson, Ohio, Oldham, Owen, Owsley, Perry, Pike, Powell, Pulaski,
Rockcastle, Russell, Scott, Shelby, Taylor, Todd, Trimble, Union, Warren, Washington,
Wayne, Webster, Whitley, Wolfe, and Woodford.

Louisiana

Parishes of Assumption, Avoyelles, Bienville, Bossier, Caddo, Caldwell, Catahoula,
Claiborne, Concordia, Franklin, Jefferson, Lafourche, La Salle, Madison, Plaquemines,
Rapides, Richland, Saint Bernard, Saint Charles, Saint James, Saint John the Baptist,
Saint Tammany, Tensas, Terrebonne, Union, and Webster.

Maine

Counties of Aroostook, Penobscot, Piscataquis, Somerset, Washington, and York.

Maryland

City of Baltimore. Counties of Anne Arundel, Baltimore, Calvert, Caroline, Carroll, Cecil,
Charles, Dorchester, Harford, Howard, Kent, Montgomery, Prince George's, Queen Anne's,
Saint Mary's, and Talbot.

Massachusetts

Counties of Barnstable, Berkshire, Bristol, Dukes, Essex, Hampden, Middlesex, Nantucket,
Norfolk, Plymouth, and Worcester.

Minnesota

County of Aitkin, Carlton, Cass, Crow Wing, Itasca, Lake, and Saint Louis.

Mississippi

Counties of Adams, Claiborne, George, Hancock, Harrison, Jackson, Jefferson, and Stone.

Missouri

Counties of Christian, Douglas, Greene, Lawrence, Stone, and Webster.

Montana

Counties of Beaverhead, Broadwater, Gallatin, Jefferson, Madison, and Powder River.

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Nebraska

Counties of Adams, Arthur, Banner, Box Butte, Buffalo, Burt, Cass, Cheyenne, Clay,
Colfax, Cuming, Dakota, Dawes, Deuel, Dodge, Douglas, Dundy, Garden, Grant, Hall,
Hitchcock, Kearney, Keith, Kimball, Madison, Morrill, Perkins, Phelps, Pierce, Platte, Sarpy,
Saunders, Scotts Bluff, Sheridan, Sioux, Stanton, Thurston, Washington, and Wayne.

Nevada

Counties of Churchill, Clark, Douglas, Elko, Esmeralda, Eureka, Humboldt, Lander, Lincoln,
Lyon, Mineral, Nye, Pershing, Storey, Washoe, and White Pine.

New Hampshire

Counties of Belknap, Carroll, Grafton, Hillsborough, Merrimack, Rockingham, Strafford, and
Sullivan.

New Jersey

County of Salem.

New Mexico

Counties of Bernalillo, Catron, Chaves, Cibola, Colfax, Curry, DeBaca, Dona Ana, Eddy,
Grant, Guadalupe, Harding, Hidalgo, Lea, Lincoln, Los Alamos, Luna, McKinley, Mora,
Otero, Quay, Rio Arriba, Roosevelt, Sandoval, San Juan, San Miguel, Santa Fe, Sierra,
Taos, Torrance, Union, and Valencia.

New York

Counties of Franklin and Saint Lawrence.

North Carolina

Counties of Alexander, Avery, Burke, Caldwell, Catawba, Cherokee, Clay, Cleveland,
Davie, Forsyth, Gaston, Graham, Granville, Haywood, Henderson, Iredell, Jackson,
Lincoln, Macon, Madison, Mecklenburg, Mitchell, Person, Polk, Rowan, Stokes, Surry,
Union, Vance, Warren, Watauga, Wilkes, Yadkin, and Yancey.

North Dakota

Counties of Benson, Burleigh, Morton, Oliver, and Pierce.

Oklahoma

Counties of Alfalfa, Atoka, Beaver, Beckham, Blaine, Caddo, Choctaw, Cimarron,

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Comanche, Cotton, Creek, Custer, Dewey, Ellis, Garfield, Grady, Grant, Greer, Harmon,
Harper, Jackson, Jefferson, Kay, Kingfisher, Kiowa, Lincoln, Logan, McCurtain, Major,
Noble, Osage, Pawnee, Payne, Pushmataha, Roger Mills, Stephens, Texas, Tillman,
Tulsa, Washita, and Woodward.

Oregon

Counties of Benton, Clackamas, Columbia, Coos, Crook, Curry, Deschutes, Douglas,
Gilliam, Grant, Harney, Jackson, Jefferson, Josephine, Klamath, Lake, Lane, Lincoln, Linn,
Malheur, Marion, Morrow, Multnomah, Polk, Sherman, Umatilla, Wasco, Washington,
Wheeler, and Yamhill.

Rhode Island

Counties of Bristol, Kent, Newport, Providence, and Washington.

South Carolina

Counties of Abbeville, Aiken, Allendale, Anderson, Bamberg, Barnwell, Calhoun, Cherokee,
Chester, Colleton, Dorchester, Fairfield, Greenville, Greenwood, Hampton, Jasper,
Kershaw, Lancaster, Laurens, Lexington, McCormick, Oconee, Orangeburg, Pickens,
Richland, Spartanburg, Sumter, Union, and York.

South Dakota

Counties of Bennett, Fall River, Lincoln, Oglala Lakota, and Union.

Tennessee

Counties of Anderson, Bledsoe, Bradley, Campbell, Cannon, Carter, Cheatham, Claiborne,
Clay, Cocke, Cumberland, Davidson, DeKalb, Dickson, Franklin, Giles, Greene, Grundy,
Hamblen, Hamilton, Hickman, Jefferson, Johnson, Lincoln, Loudon, McMinn, Marion,
Marshall, Maury, Meigs, Monroe, Morgan, Pickett, Polk, Putnam, Rhea, Roane, Rutherford,
Scott, Sequatchie, Sullivan, Unicoi, Van Buren, Warren, Washington, White, Williamson,
and Wilson.

Texas

Counties of Anderson, Andrews, Aransas, Archer, Armstrong, Atascosa, Austin, Bailey,
Bandera, Bastrop, Baylor, Bee, Bell, Bexar, Blanco, Borden, Bosque, Bowie, Brazoria,
Brazos, Brewster, Briscoe, Brooks, Brown, Burleson, Burnet, Caldwell, Calhoun, Callahan,
Cameron, Camp, Carson, Cass, Castro, Cherokee, Childress, Clay, Cochran, Coke,
Coleman, Collin, Collingsworth, Colorado, Comal, Comanche, Concho, Coryell, Cottle,
Crane, Crockett, Crosby, Culberson, Dallam, Dallas, Dawson, Deaf Smith, Denton, DeWitt,
Dickens, Dimmit, Donley, Duval, Eastland, Ector, Edwards, Ellis, Erath, Falls, Fayette,
Fisher, Floyd, Foard, Fort Bend, Franklin, Freestone, Frio, Gaines, Galveston, Garza,

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Gillespie, Glasscock, Goliad, Gonzales, Gray, Gregg, Grimes, Guadalupe, Hale, Hall,
Hansford, Hardeman, Harris, Harrison, Hartley, Haskell, Hays, Hemphill, Henderson,
Hidalgo, Hill, Hockley, Hood, Houston, Howard, Hudspeth, Hunt, Hutchinson, Irion, Jack,
Jackson, Jeff Davis, Jim Hogg, Jim Wells, Johnson, Jones, Karnes, Kaufman, Kendall,
Kenedy, Kent, Kerr, Kimble, King, Kinney, Kleberg, Knox, Lamb, Lampasas, La Salle,
Lavaca, Lee, Leon, Liberty, Limestone, Lipscomb, Live Oak, Llano, Loving, Lubbock, Lynn,
McCulloch, McLennan, McMullen, Madison, Marion, Martin, Mason, Matagorda, Maverick,
Medina, Menard, Midland, Milam, Mills, Mitchell, Moore, Morris, Motley, Nacogdoches,
Navarro, Nolan, Nueces, Ochiltree, Oldham, Palo Pinto, Parker, Parmer, Pecos, Potter,
Presidio, Rains, Randall, Reagan, Real, Red River, Reeves, Refugio, Roberts, Robertson,
Rockwall, Runnels, Rusk, San Patricio, San Saba, Schleicher, Scurry, Shackelford,
Sherman, Smith, Somervell, Starr, Stephens, Sterling, Stonewall, Sutton, Swisher, Tarrant,
Taylor, Terrell, Terry, Throckmorton, Titus, Tom Green, Travis, Trinity, Upshur, Upton,
Uvalde, Val Verde, Van Zandt, Victoria, Walker, Waller, Ward, Washington, Webb,
Wharton, Wheeler, Wichita, Wilbarger, Willacy, Williamson, Wilson, Winkler, Wise, Wood,
Yoakum, Young, Zapata, and Zavala.

Utah

Counties of Beaver, Box Elder, Cache, Carbon, Daggett, Davis, Duchesne, Emery,
Garfield, Grand, Iron, Juab, Kane, Millard, Morgan, Piute, Rich, Salt Lake, San Juan,
Sanpete, Sevier, Summit, Tooele, Uintah, Utah, Wasatch, Washington, Wayne, and Weber.

Virginia

Cities of Alexandria, Bedford, Buena Vista, Fairfax, Falls Church, Richmond, and Roanoke.
Counties of Alleghany, Amelia, Amherst, Arlington, Bath, Bedford, Bland, Botetourt,
Buchanan, Buckingham, Caroline, Charlotte, Chesterfield, Craig, Culpeper, Cumberland,
Dickenson, Dinwiddie, Fairfax, Fauquier, Floyd, Franklin, Giles, Goochland, Halifax,
Hanover, Henrico, Henry, Lee, Loudoun, Louisa, Mecklenburg, Nottoway, Orange, Patrick,
Powhatan, Prince Edward, Prince William, Pulaski, Roanoke, Rockbridge, Spotsylvania,
Stafford, Tazewell, Wise, and Wythe.

Washington

Counties of Adams, Benton, Chelan, Clallam, Clark, Cowlitz, Douglas, Franklin, Grant,
Grays Harbor, Jefferson, King, Kittitas, Klickitat, Lewis, Mason, Okanogan, Pacific, Pierce,
San Juan, Skagit, Snohomish, Thurston, Wahkiakum, Walla Walla, Whatcom, and Yakima.

West Virginia

Counties of Boone, Clay, Fayette, Greenbrier, Kanawha, Lincoln, Logan, McDowell,
Mercer, Mingo, Monroe, Nicholas, Pocahontas, Putnam, Raleigh, Summers, Wayne, and
Wyoming.

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Wisconsin

County of Douglas.

Wyoming

Counties of Albany, Big Horn, Campbell, Carbon, Converse, Fremont, Goshen, Hot
Spri ngs, Johnson, Laramie, Natrona, Niobrara, Platte, Sheridan, Sweetwater, Uinta, and
Washakie.

Guam

Island of Guam.

Commonwealth of the Northern Mariana Islands

Islands of Rota and Saipan.

Commonwealth of Puerto Rico

Municipalities of Adjuntas, Aguas Buenas, Aibonito, Arroyo, Barranquitas, Cabo Rojo,
Caguas, Canovanas, Carolina, Cayey, Cidra, Coamo, Guanica, Guayama, Guayanilla,
Guaynabo, Gurabo, Humacao, Juana Diaz, Juncos, Lajas, Las Piedras, Loiza, Maricao,
Maunabo, Naguabo, Patillas, Penuelas, Ponce, Rio Grande, Sabana Grande, Salinas, San
German, San Juan, San Lorenzo, Santa Isabel, Trujillo Alto, Vieques, Villalba, Yabucoa,
and Yauco.

United States Virgin Islands

Islands of Saint Croix, Saint John, and Saint Thomas.