Farmers can defer tax due on tobacco quota buyouts.(FARM TAXES)

Kiplinger Tax Letter, The, July, 2005

Farmers can defer the tax due on tobacco quota buyouts... government payments for terminated tobacco marketing quotas that will be distributed to former quota holders over the next 10 years. Recently, IRS ruled that most of the payments are taxed as capital gains.

Growers have until Sept. 16 to set up deferred like-kind exchanges of the quota payments and postpone the tax bill, according to the Service. This relief is available only to quota holders who applied for payments by June 17, 2005. The payments are treated as an interest in real estate and can be swapped for other realty, whether improved or unimproved. Other rules must be met as well, such as using a qualified intermediary, identifying the replacement real estate in writing within 45 days and...

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