Taxes on Timber sales

[beenthere]

This the one Ron ?
http://www.fs.fed.us/cooperativeforestry/library/revised_taxtips2014.pdf

[pine]

No I think he is referring to this one.  That one was 2014.

2015 Tax Tips for Forest Land Owners

[beenthere]

thanks pine

[Ron Scott]

Yes, the 2015 information is now available.

[Ron Scott]

Timber Tax Filing for the 2015 Tax Year
Time: 1:00 – 2:00 Eastern Time, 22 January 2016, Friday

Timber tax laws have changed due to the new tax law that was passed by Congress in December 2015. Brand new tax provisions on capital gains for timber corporations will affect timber businesses and owners. Business deductions on equipment costs have been increased significantly. Special charitable donation deduction on qualified conservation easement was extended.

To help the 2015 tax return filing, this one-hour webinar will cover the rules for timber tax reporting, including the latest law changes. It will cover the 1099 filing that the foresters must know. Bring your tax questions to get answers from the presenter.

Credits: One hour of SAF CFE Category I credits have been applied for.

Who will benefit: landowners, foresters, loggers, timber companies, extension agents, natural resource agency program staff and directors, CPAs, Tax Enrolled Agents, attorneys, and other tax preparers

Presenter: Dr. Linda Wang, National Timber Tax Specialist, USDA Forest Service

[pine]

Any link to the source and more specifically how to register for the webinar?

[Ron Scott]

http://www.forestrywebinars.net/webinars/timber-tax-filing-for-the-2015-tax-year

[Ron Scott]

2016 Tax Tips Bulletin Available

Dr. Linda Wang, National Timber Tax Specialist with the U.S. Forest Service, has finalized Tax Tips for Forest Landowners for the 2016 Tax Year. This publication reviews the major Federal income tax laws to help you file your 2016 income tax return. Although tax laws on timber transactions are not common knowledge, they are an important part of the ongoing cost of owning and managing timber, engaging in forest stewardship activities, and complying with tax law.

http://www.fs.fed.us/spf/coop/library/taxtips2016.pdf

[Lookin4GoodLife]

Good googely, making my head swim!     I never knew all this.  I guess it's obvious that if you sell *anything* for income, the IRS wants their cut, I just didn't realize the complexities of it all.  No wonder people are barking about a "fair tax", but I don't see how that would affect your state from levying against your timber profits.  (And I'm not trying to start an argument about tax plans!  ) 

I am planning on buying a small bandsaw mill and cutting trees to build various structures on my property such as pole barns, sheds, etc.  I wasn't planning on running any type of business or deducting any of my expenses, but do I have to consider the value of the lumber as income when building my buildings?  I don't know how the IRS would know about that, but I certainly don't want to run afoul of them or the state of Alabama when the value of my property goes up due to the buildings being appraised.  When we financed the land, the banker told me I couldn't sell the timber without consulting with them because since the land was financed, they'd want to bring in their forester to make sure the profit was maximized and they'd of course want their "cut" of the profits.  I had no idea about tax implications of anything like that, though.  I appreciate y'all posting all those links, I'll start reading through all that and trying to make some sense of it all.

[WDH]

Timber is "real property" and if you borrow money on a piece of property, the timber is part of the collateral.  You cannot sell that timber without a release from the lending institution, and they usually require that some of the sale proceeds go against the note so that the value of the property is at least worth what you owe remaining on the note. 

If you hold the property for at least one year before selling timber, the profit from the timber sale is taxed as a capital gain which is a lower tax rate.  You can deduct the cost of the timber from the sale proceeds if you developed a cost basis at the time of purchase of the property.  This is called your timber basis.  It usually requires a licensed Forester to do an appraisal to establish the cost basis of the timber. 

If you site prepare and plant a stand of timber, the cost basis becomes the cost to site prepare and plant the trees.  This cost basis stays with that stand of timber until it is sold, and that cost basis can be deducted from the proceeds of the sale.  It is always prudent to know the value of any timber on any property that you buy so that you can use that value as the cost basis when you sell that timber in the future. 

If the fair market of a piece of property is $100, and if there is an equal value of timber and land, in this case $50 each, and if you make a good deal and buy the property at $80, which is 80% of the fair market value, you have to prorate the cost basis and in this case assign a cost basis of  80% times $50 for the land and 80% times $50 for the timber.  This establishes a cost basis of $40 for the land and $40 for the timber.

[Ron Scott]

Please join us for a timber tax workshop in January!

When: January 11th, from 5-7 pm
Where: The Bungalow Inn Restaurant, Manistee, MI

This 2-hour workshop, presented by Susan Metcalfe of Metcalfe Forestry LLC & Burns Timber Tax Service, is designed for forestland owners, foresters, loggers and tax preparers.  If you have bought or sold timber within the past 3 years, or plan to harvest timber, then this is a must-attend event.  The workshop will cover a range of topics involving your potential taxes on money earned  from the buying or selling of timber, how to keep more $$ in your pocket and pay less in taxes.  Also covered will be common myths in the forestry and accounting communities, and an explanation of the capital gains treatment of the purchase and sale of timber.  Included will be a discussion about the Michigan Commercial Forest Act and the Qualified Forest Program, two property tax programs that provide substantial tax benefits to landowners practicing wise forest management.

Complementary appetizers and beverages!  Coffee, soda, water, and appetizers are provided free of charge. Dinner and alcoholic drinks are the responsibility of the attendee.

Register by January 3rd!  Seats for this popular workshop will fill up fast, so be sure and register by January 3rd, 2018! Reserve your spot by contacting me at 231-889-9666 or joshua.shields@macd.org.

Minimum Suggested donation $5:  A minimum donation of $5/person is requested at the door to help cover the speaker fees, appetizers, and beverages.

Josh Shields, Ph.D.
Outreach Forester, Forestry Assistance Program (FAP)
Manistee and Mason-Lake Conservation Districts
Certified Forester with Society of American Foresters
Certified Wildlife Biologist with The Wildlife Society
Certified Commercial Pesticide Applicator in Michigan
Office: 231-889-9666
Mobile: 989-220-9236
Email: joshua.shields@macd.org
Manistee Conservation District website: http://www.manisteecd2.org/
Mason-Lake Conservation District website: http://www.mason-lakeconservation.org/

[Ron Scott]

Virtual Session coming up in November 2021.

IncomeTaxTimberSales - Wisconsin Forestry Center | UWSP

[mike_belben]

Thanks for posting these events all these years ron.  Is timber tax federal, state or likely both? 

[WDH]

Depends on if your state has a state income tax.  Georgia does.  

[Wudman]

My timber tax story.......Back when I was a young forester about 3 years out of school I was working for a wood dealer in Rockingham, NC.  I got a lead on a tract of timber and went to see the gentleman.  What I saw was the prettiest stand I have seen to this day.  It was a mixed pine / yellow poplar stand averaging about 24" dbh.  The gentleman and his sister had inherited from their father.  I was fresh out of one of the timber tax courses and I asked the fellow if he had consulted his tax attorney or CPA prior to selling the wood.  He had not.  I told him to talk to someone before selling the timber.  Long story short.....They decided to go with a sealed bid timber sale.  On sale day I was the second highest bidder (sealed bid sale), $263 below the high bid of $699,000.  

I got a call from this gentleman a few months later.  He wanted to thank me for instructing him to call a tax attorney.  He said that saved him over $66,000 in tax liability.  The funny part to this story was at his next timber sale.  It was probably 20 years later.  I had been gone from the area for 18 years.  He tracked me down through some in-laws to see if I wanted to buy his timber.  Made me feel pretty good for helping him out and being remembered for it.

Wud

[mike_belben]

Glad to hear a tax story that ended well.  


Ive been trying to give good advice to someone since before they made a huge timber sale mistake, and is still in denial.  I think some day itll bite them. 

Theres a way for forestors to go back and calculate a basis, isnt there?

[Wudman]

You can calculate a basis up until the time the timber is cut.  Once it has been cut, there is no recourse.  (I believe, but consult a tax attorney.  Tax law is a moving target - no telling what is actually in this 3.5 trillion plan - guess "we'll have to pass it to find out".)

[Ron Scott]

IRS use to be generally ok with a "certified" forester going back 10 years in calculation of the basis after a property transfer in ownership, but now I don't know under what this administration's plans for IRS controls are.

[WDH]

Given tree growth, form, and taper, a Forester can rebuild the stem from the stump diameter and develop a good estimate of that tree's volume.  Given that trees age ( stump ring count), you can estimate an "average" product breakdown using other similar trees in the general area of that same age and species.  

[Ron Scott]

Yes, have also done these type calculations where I've been an expert witness in timber trespass cases, and it has always been acceptable in court.

[Ron Scott]

Hey all,
 
Please join us for a timber tax workshop!  It will be at 5:30pm on 12/15/2021, in Manistee.  Please register by 12/10/2021 and please note that we must cap the number at 40 people (this includes the speaker and staff).  See below and attached pdf file for more details.
 
*Timber and Taxes Workshop
 
Wednesday, December 15th, 2021, 5:30pm
Downtown Manistee West Shore Community College, 400 River Street, Classrooms A and B, Manistee, MI 49660

This 2-hour workshop, presented by Susan Metcalfe of Metcalfe Forestry Co. & Burns Timber Tax Service, is designed for forest landowners, foresters, loggers and tax preparers. If you have bought or sold timber within the past 3 years, or plan to harvest timber, then this is a must-attend event. The workshop will cover a range of topics involving your potential taxes on the money earned from the buying or selling of timber, how to keep more $$ in your pocket and pay less in tax. It will also cover common myths in the forestry and accounting communities, and explain the capital gains treatment of the purchase and sale of timber. Included will be a discussion about the Michigan Commercial Forest Act and the Qualified Forest Program, two property tax programs that provide substantial tax benefits to landowners practicing wise forest management.

There is no cost for attending this workshop. Snacks will be provided free of charge.  A suggested minimum donation of $10/person is requested at the door to help cover the speaker fee and snacks.
REGISTRATION DEADLINE IS FRIDAY, December 10th, 2021. SPACE IS LIMITED FOR THIS WORKSHOP. For more information or to register, contact Josh Shields, Forestry Assistance Program (FAP) forester and wildlife biologist with the Manistee and Mason-Lake Conservation Districts, at 231-889-9666 or joshua.shields@macd.org.
 
Thank you for your support!
 
Josh Shields, Ph.D.
Forester and Wildlife Biologist, Forestry Assistance Program (FAP)
Manistee and Mason-Lake Conservation Districts
Certified Forester with Society of American Foresters
Certified Wildlife Biologist with The Wildlife Society
Certified Arborist with International Society of Arboriculture
Certified Commercial Pesticide Applicator in Michigan
Office: 231-889-9666
Mobile: 989-220-9236
Email: joshua.shields@macd.org
Manistee Conservation District website: http://www.manisteecd2.org/
Mason-Lake Conservation District website: http://www.mason-lakeconservation.org/

[Ron Scott]

RE:  2021 TAX TIPS
 
Forestowners might be interested in this one.
 
Tax Tips for Forest Landowners for the 2021 Tax Year Yanshu Li, Tamara L. Cushing, and Gregory E. Frey
USDA USFS, University of Georgia, and University of Florida Extension
 
https://www.fs.usda.gov/sites/default/files/fs_media/fs_document/Landowner-2021-Tax-Tips.pdf
 

[WDH]

I have been in the Forestry business for 42 years, am a Registered Forester, and had a previous role in Timberland Accounting in my professional career.  If I could get my hands on the people that created the tax laws that made growing and harvesting Timbers as complicated and convoluted as it now stands, I would hang them by their toes over a fire ant bed  :(.  

[jb616]

@Ron Scott , I just had Sue Metcalfe complete my timber tax and would highly recommend anyone in Michigan to contact her. Not cheap but far cheaper than the tax it would have been. 

[Ron Scott]

Yes, Sue Metcalfe specializes in Timber Taxes and can be very helpful in saving one tax dollars on their timber lands.