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Information provided on this site is for general guidance only and
is often simplified. Actual IRS procedures are complex, and taxpayers
should obtain professional assistance or use IRS sources for complete
information.
The
Economics of Forestry in the US
If timber prices follow historical trends real yields
over the next 10 years will probably be in the 8%-10%
range.
US
Forestry Taxation Although
forestry is not exempt from tax in the United
States, the effective level is not high and recognises
the long term nature of the business.
Calculation
of Taxable Income The
authority for deducting management and operating
expenses associated with an "investment"
is section 212 of the Internal Revenue Code.
Casualty
Losses The
tax treatment of losses to forestry assets resulting
from Acts of God such as hurricanes and fire is
generally considered one of the less satisfactory
aspects of US forestry taxation.
NB Information given here about the economics
and taxation of forestry investments is strictly
for general guidance and does not constitute investment
or professional advice. Prospective or existing
investors are strongly advised to seek professional
advice on all aspects of investment in forestry
and on its taxation, which is complex.
Establishing
The 'Basis' Of Forestry Assets
For
purchased assets, the basis is acquisition or
establishment cost. The total purchase price,
including any extra expenses incurred in obtaining
title to the property, is allocated between the
assets purchased.
For
inherited assets, the basis would be the fair
market value, or special use value if so elected,
on the date of the decedent's death, or on the
alternative valuation date. The alternative valuation
date is the earlier of six months after the decedents
death or the date an estate is sold. This often
results in a higher basis figure.
For
gifted assets, the 'basis' calculation takes into
account the donor's adjusted basis just before
the gift. the fair market value at the time of
the gift, and the amount of any gift tax paid.
For
exchanged assets, the basis is the fair market
value at the time of exchange; the exchange may
incur a taxable gain or a deductible loss.
As
with any asset, the original basis cost will change
as capital improvements, carrying charges, or
other additions are made to the asset, or as allowances
for depletion, amortization, or depreciation are
deducted. The amount remaining in any account
after changes have been made is the adjusted basis.
On
a sale of timber assets, the adjusted basis cost
is apportioned to the part sold on a volume calculation.
The cost per unit of volume is known as the 'depletion
unit' and is used to calculate the new adjusted
basis after any sale, or casualty loss or theft.
The
Economics of Forestry in the US
If timber prices follow historical trends real yields
over the next 10 years will probably be in the 8%-10%
range.
US
Forestry Taxation Although
forestry is not exempt from tax in the United
States, the effective level is not high and recognises
the long term nature of the business.
Calculation
of Taxable Income The
authority for deducting management and operating
expenses associated with an "investment"
is section 212 of the Internal Revenue Code.
Casualty
Losses The
tax treatment of losses to forestry assets resulting
from Acts of God such as hurricanes and fire is
generally considered one of the less satisfactory
aspects of US forestry taxation.
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