iDRY Vacuum Kilns

Sponsors:

Timber Sales Tax Question regarding reinvestment in the property

Started by Industry_Jon, March 07, 2021, 10:56:34 AM

Previous topic - Next topic

0 Members and 1 Guest are viewing this topic.

Industry_Jon

I can't find this answer anywhere online. If the landowner reinvests the proceeds from timber sales back into the property, (like improvements to an existing house on that property) could are those proceeds be exempt from taxes? 

I understand that there are some exceptions for capital gains taxes. Could this be one? 

stavebuyer

Capital improvements probably are not going to be deductible but may be depreciable. If you have a basis established in your timber prior to the harvest you may be able to deplete the basis amount and reduce your sale gain. Gets complicated pretty quickly. You need a competent tax professional familiar with timber tax issues. Most are not.

Clark

Generally speaking "improvements" to the property that you want to deduct from a timber expense have to benefit the timber. So putting in new wall-to-wall carpeting in a house that happens to be on the property where the timber was cut is not going to pass muster with the IRS. 

For recreational landowners (meaning not industrial timberland owners) you can deduct expenses (including taxes) for the property from any income. You cannot create a negative income stream and then apply that to future taxes. Basically, $ out can be deducted from $ in to zero. Reforestation, trail/road access and equipment for maintenance can generally be deducted.

Clark
SAF Certified Forester

Ron Scott

What Clark stated.

Any item deductions need to be directly related to your timber growing, harvesting, forest land improvements, and management, etc. for "commercial" timber sales.

https://www.fs.fed.us/spf/coop/library/timbertax.pdf
~Ron

Thank You Sponsors!