--
My off-topic statement:
US Doctors = No Accountability
"Clear Cut" wrote in message
...


In article ,
"JimiFromMI" wrote:

Dear US Foresters:

As I understand it, a timber sale should be taxed by Uncle Sam only to
the
extent of the growth of the trees since

[SNIP]


A good source of information can be found at:

http://www.timbertax.org/


me-thinks the site is defunct -- or maybe its down for some reason.

Thanks,

DVK



Spend some quality time with this site and its links.


Some types of timber sales are treated as capital gain, others as
ordinary income. In most cases capital gains is preferred. Timber sales
must be carefully structured to achieve capital gains according IRS code
Section 631(b).

A section 631(b) transaction is one in which you do not receive an
up-front lump-sum for the timber but are paid for the timber as it is
cut. The pay as cut contract is referred to as a "disposal with an
economic interest retained."

Section 631b of the Internal Revenue Code (IRC) is of special interest
to forest landowners who manage their land. This section affords
capital gains treatment to the taxpayer who retains an economic interest
in the timber. The seller must retain legal title to the timber until
it is cut. The date of cutting is when the volume of the timber is
first accurately determined. The seller must be paid on a per unit cut
basis. When selling timber on the stump, your contract must state that
you retain title to the timber until it is scaled and that you are paid
on a per unit basis. A well-written contract is essential to
demonstrate a retained economic interest in the timber.

Depletion Allowance: As timber is cut, the original capital investment,
the basis of the timber, is reduced or depleted. Because the trees are
rarely all cut at the same time, the original cost must be modified to
give the adjusted basis. The adjusted basis is the original purchase
price of the timber adjusted for addition or deletion of the capital of
the property. The depletion allowance is deducted from timber sale
receipts in calculating taxable income. In this way the investment in
timber is recovered.

To use the depletion allowance, the cost basis of the timber must be
established. The cost basis is the fair market value of the timber at
the time of acquisition. The cost of land and improvements are carried
in a separate account. At the time of purchase or inheritance, the fair
market value of the property is allocated between the timber and the
land. These amounts can be estimated well after original acquisition;
however, there is a cost in making such determinations. For most
landowners, if the property was acquired more than 10 years ago then the
basis may have been so small that the cost of calculating the original
basis may exceed the gain in tax savings. The more recent the purchase,
the greater the justification of the expense.


Basically, I am asking the question: Is it a piece of cake for the
forester
to calculate the capital gains on my trees since I've acquired the
property
some years ago? How many years can pass before it does become a burden?
Should I expect the forester to understand what the hell I'm talking
about
in the first place -- have they been educated on the tax code?

Some methods use average valuses for timer and land in your area -
comparible sales. The more detailed method requires an invnetlory of
your property, then a negative growth projection to the time of
purchase. Using historical sales data, a timber value can be calculated.

The only management activities that I've done is to girdle obvious cull
trees and remove the tops of previously felled trees for personal
firewood
consumption.

In all dealings with the IRS, keep excellent records.