Drought and flood regions have been defined earlier than usual this year and could influence your Livestock Tax Deferral.

What is the Livestock Tax Deferral Provision?

The Livestock Tax Deferral provision allows farmers who sell part of their breeding herd due to drought or flooding in prescribed drought or flood regions to defer a portion of sale proceeds to the following year.

How much of a reduction in herd is needed to qualify?

To defer income, the breeding herd must have been reduced by at least 15%.

How much of the sale proceeds can be deferred?

If the breeding herd has been reduced by at least 15%, but less than 30%
30% of income from net sales can be deferred

If the breeding herd has been reduced by 30% or more
90% of income from net sales can be deferred

Breeding animals include:

  • Bovine cattle, bison, goats, sheep, deer, elk and other similar ungulates that are kept for breeding as well as horses that are kept for breeding.
  • All breeding animals must be older than 12 months.

How does the tax deferral work?

  • In a year in which a region has been prescribed, income from livestock sales are deferred to the next tax year when the income may be at least partially offset by the cost of reacquiring breeding animals, thus reducing the potential tax burden.
  • In the case of consecutive years of drought or excess moisture and flood conditions, producers may defer sales income to the first year in which the region is no longer prescribed.

Where are the prescribed regions for 2021?

A national list of the prescribed regions can be found on the Government of Canada website HERE.

How are drought and flood regions defined?

  • Prescribed regions are designated, on the advice of the Minister of Agriculture and Agri-Food Canada to the Minister of Finance, when forage yields are less than 50% of the long-term average as a result of drought or flooding in a particular year.
  • To be designated, the affected area must have recognized geo-political boundaries (for example municipalities or counties) and be large enough to have an impact on the industry.
  • Impacts on individual municipalities/regions would not result in a designation.

Questions?

For more information, advise, or if you have questions about how the Livestock Tax Deferral provision could affect your specific operation, please contact our Agriculture Accounting expert, Zach Keith.

Zach Keith

Zach Keith

Zach champions Avail’s Agriculture division. He helps clients with all aspects of their operation, from taking advantage of government programs to transition planning.

Service Expertise: Audit , CFO Services

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