Farmers may report payments received during the disaster year in the tax year following the disaster, if they can show that their normal business practice is to receive income from crops the year after the crops are produced. To report this income later, a statement must be attached to either the original or an amended return for the year the disaster occurred. Taxpayers who subsequently want to amend an income tax return to claim this election must write to the IRS District Director where the return was filed, stating significant business reasons for the change. While income tax regulations may permit postponement of reporting payments received in the disaster year, no leeway is allowed in reporting loss payments received by cash-basis taxpayers in years after the disaster year. Thus crop insurance or disaster program payments received in 1994 for the 1993 drought must be included in income on the 1994 tax return.
Tax planning related to such occurrences is discussed later.
Feed Assistance and Payments. Feed assistance, reimbursements for feed costs, and other benefits to livestock producers resulting from a livestock emergency must be counted as income in the year they are received. Such income includes the market value of donated feed, the difference between market prices and the actual prices paid by the livestock producer, and any cost reimbursements received. Cash-basis taxpayers may usually take a current deduction for feed expense equal to the value of feed or feed cost reimbursements received. Drought Sales Of Livestock Market Livestock.