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Ranchers.net

Herd liquidation causes tax headache
Friday, July 28, 2006, 2:54 PM

by Peter Shinn

There’s been a lot of talk about herd liquidation in drought-ravaged areas of South Dakota. But drought-related herd liquidation isn’t limited to that state.

According to Nebraska Cattlemen Executive Vice President Mike Kelsey, herd liquidation is happening in drought-stricken areas of Nebraska, too. “We’re seeing some of that in Nebraska,” he said. “Maybe not quite as widespread as what I’ve heard in some of the Dakotas, but yes we have.”

Kelsey also said, due to the multi-year nature of the ongoing drought, herd liquidation this year in Nebraska has been compounded by herd liquidation in prior years. “Couple that with the fact that we’ve seen some of that in the past, in terms of previous years, and it’s making things very difficult,” he said.

Kelsey’s observation is shared by the University of Nebraska Institute of Agriculture and Natural Resources. In a press release earlier this week, the Institute said a recent survey of central and western Nebraska livestock producers found they had cut their herds by 30% from 2002 through 2004.

Kelsey said those who had liquidated their herds in recent years did so in hopes of using the money made selling their livestock to rebuild their herds when the drought eased. But the drought continues. And Kelsey said that’s creating a tax problem for those who liquidated their herds in prior years. “Producers who liquidated pieces or parts of their herd in years past with the idea of holding onto that money and then turning it over and reinvesting it into the cow herd, unfortunately, the drought has been ongoing long enough, that some of that money may be eligible for capital gains tax, and that’s not appropriate,” he said.

Kelsey said the capital gains issue is a top priority for Nebraska Cattlemen. He said both of Nebraska’s U.S. Senators, Republican Chuck Hagel and Democrat Ben Nelson, both support the concept of providing capital gains tax relief to ranchers who have liquidated their herds.
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