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Publication 225
taxmap/pubs/p225-006.htm#en_us_publink1000217712

Sales of Farm Products(p8)

rule
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Where to report.(p8)

rule
Table 3-1 shows where to report the sale of farm products on your tax return.
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Schedule F.(p8)
Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. This includes money and the fair market value of any property or services you receive. When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). See chapter 6 for information on the basis of assets. You generally report these amounts on Schedule F for the year you receive payment.
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Example.(p8)

In 2013, you bought 20 feeder calves for $27,000 for resale. You sold them in 2014 for $35,000. You report the $35,000 sales price on Schedule F, line 1a, subtract your $27,000 basis on line 1b, and report the resulting $8,000 profit on line 1c.
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Form 4797.(p8)
Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. In either case, you should always report these sales on Form 4797 instead of Schedule F. See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Animals you do not hold primarily for sale are considered business assets of your farm.
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Table 3-1. Where To Report Sales of Farm Products

Item SoldSchedule FForm 4797
Farm products raised for saleX  
Farm products bought for resaleX  
Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised) X
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Sale by agent.(p8)

rule
If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. This applies even if your agent pays you in a later year. For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2.
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Sales Caused by Weather-Related Conditions(p8)

rule
If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. You must meet all the following conditions to qualify.
Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies.
Deposit
A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. See Other Involuntary Conversions in chapter 11.
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Usual business practice.(p8)

rule
You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region.
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Connection with affected area.(p9)

rule
The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock.
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Classes of livestock.(p9)

rule
You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Do not separate animals into classes based on age, sex, or breed.
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Amount to be postponed.(p9)

rule
Follow these steps to figure the amount of gain to be postponed for each class of animals.
  1. Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock.
  2. Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions.
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Example.(p9)

You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. As a result of drought, you sold 135 head during 2013. You realized $236,250 from the sale. On August 9, 2013, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. The income you can postpone until 2014 is $61,250 [($236,250 ÷ 135) × 35].
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How to postpone gain.(p9)

rule
To postpone gain, attach a statement to your tax return for the year of the sale. The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain.
Generally, you must file the statement and the return by the due date of the return, including extensions. However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Attach the statement to the amended return and write "Filed pursuant to section 301.9100-2" at the top of the amended return. File the amended return at the same address you filed the original return. Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS.