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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.

Establishing The 'Basis' Of Forestry Assets
For purchased assets, the basis is acquisition or establishment cost.

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.
Capital Gains Holding Requirements
Provisions of a number of recent tax acts affect the capital gains tax treatment of timber sales.


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.

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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.

Establishing The 'Basis' Of Forestry Assets
For purchased assets, the basis is acquisition or establishment cost.

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.
Capital Gains Holding Requirements
Provisions of a number of recent tax acts affect the capital gains tax treatment of timber sales.

 

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