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Author Topic: Tax advice needed  (Read 2782 times)

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Offline Larry

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Tax advice needed
« on: September 25, 2005, 03:48:41 PM »
Plan on logging and grade sawing around 50 mbf of hardwoods on our farm this fall, winter, and spring.  Got a good buyer so I知 pretty set except for taxes.  Never took a tree inventory when I bought the ground 20 years ago because I procrastinated. :-[  I hope to sell the farm next spring or summer.  Bare ground has appreciated in value 5 times since we bought the place.  House has appreciated far slower but I can use the tax exemption for the house.  Need some ideas/advice and than I can talk with our CPA and forester if needed, with some intelligence.
Larry, making useful and beautiful things out of the most environmental friendly material on the planet.

We need to insure our customers understand the importance of our craft.

Offline wiam

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Re: Tax advice needed
« Reply #1 on: September 25, 2005, 07:43:31 PM »
Several years ago (read cloudy memory)  I had an issue with a 1099 from a mill that was filled out incorrectly.  The 1099 was for logs I had cut on my land and hauled myself.  The IRS thought it was for contract labor and wanted more taxes.  I chased many IRS reps and the answer that I got eventually was that it was capital gains because I "cut and hauled my own lumber and I had owned the land for a certain number of years" (cloudy on number).  I then had to file a 1040X with this explanation.  Could not believe it worked, but I heard nothing back.

Will

Offline Ron Wenrich

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Re: Tax advice needed
« Reply #2 on: September 25, 2005, 08:12:15 PM »
I'm not a tax expert, but it doesn't seem to matter too much if you are going to be selling the land.   You would be deducting the timber value and lowering the original price of the land.  Wouldn't it all just come out in the wash?

The other thing to think about is how much would the timber be worth 20 years ago?  The trees were much smaller and the timber value was much lower.  So. maybe it wouldn't be that much difference.
Never under estimate the power of stupid people in large groups.

Offline Ron Scott

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Re: Tax advice needed
« Reply #3 on: September 25, 2005, 09:41:54 PM »
A certified forester could discount your timber back 20 years to determine its value when you purchased the land with timber and determine your timber basis at that time for a timber depletion account.

IRS usually requires a Timber Basis Report prepared by a certified forester, but often frowns on going back farther than 10 years for a timber basis. You will probably just need to declare the capital gains on the timber sale after all costs are deducted since you never had your timber basis determined when you purchased the property.

You might transfer the property to one of your children etc. and have them have the current timber basis determined for a timber depletion account, but they would have to declare any taxes due on "their" timber.

Best to check the situation out with your CPA or local tax expert.
~Ron

Offline Frank_Pender

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Re: Tax advice needed
« Reply #4 on: September 25, 2005, 11:31:43 PM »
Amen to Ron's last line.  My accountant was/is a National Tree Farmer of the year.  He is good.  Last year he saved me more than ?????? in taxes. 8) 8) 8)
Frank Pender

Offline 4str

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Re: Tax advice needed
« Reply #5 on: October 10, 2005, 12:30:31 AM »
Unless your cutting some pretty high-value stuff (and it had substantial value 20 years ago when you bought it) you'll probably find that inflation has eaten up most of your recoverable basis in the timber by now. At least this has been the case with most of my clients. Twenty years is just about as far back as I can go and justify the cost of the appraisal based on the likely tax savings - and thats with cherry and hard maple.

Just make sure the manner in which you sell the timber will qualify for capital gains treatment. And don't forget, capital losses can be deducted dollar for dollar against capital gains (but not against ordinary income) - so, if you've got some poorly performing stocks you've been meaning to dump, now might be the time.

Check out the  national timber tax website (I can't remember the URL). Hope this helps.


Offline Jeff

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Re: Tax advice needed
« Reply #6 on: October 10, 2005, 07:59:48 AM »
Just call me the midget doctor.
Forestry Forum Founder and Chief Cook and Bottle Washer.

Commercial circle sawmill sawyer in a past life.
Ezekiel 22:30

Online SwampDonkey

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Re: Tax advice needed
« Reply #7 on: October 10, 2005, 08:13:43 AM »
From Timber Tax Website

Quote
TIMBER CASUALTY LOSSES -  No Special Relief for Hurricane Katrina Victims

Natural disasters that destroy and/or damage timber don稚 result in a significant tax loss deduction for most taxpayers. Decades of work and expenditures for planting and management of timber are reduced to splinters in an instant with little hope of a significant tax...

Same thing happened up here in Nova Scotia and the Federal Government cashed in on all this extra income for revenue.  >:(  Of course the biggest trouble is that the majority of woodlot owners wouldn't keep good records of their management efforts. Alot probably never had management plans either. (just my speculation)
Move'n on.

Offline Larry

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Re: Tax advice needed
« Reply #8 on: October 10, 2005, 07:42:00 PM »
The timber is all walnut.  Plan on selling all the veneer logs, and some of the saw logs.  I値l mill all of the low quality and small top  logs into lumber or flooring cants.

Thanks for the advice and that link...looks like I have some studying to do.
Larry, making useful and beautiful things out of the most environmental friendly material on the planet.

We need to insure our customers understand the importance of our craft.

Offline maple flats

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Re: Tax advice needed
« Reply #9 on: October 11, 2005, 05:47:32 PM »
If it IS WALNUT I would get a good forester to work out a basis. Good luck, you're going to be rich (before taxes) :o :o :o
logging small time for years but just learning how,  2012 36 HP Mahindra tractor, 3point log arch, 8000# class excavator, lifts 2500# and sets logs on mill precisely where needed,  Peterson ATS upgraded to WPF mill, maple syrup a hobby that consumes my time. looking to learn blacksmithing.

Online SwampDonkey

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Re: Tax advice needed
« Reply #10 on: October 11, 2005, 06:21:05 PM »
This has nothing to do with Larry's situation.

There was a local woodlot owner walking around his lot with dollar signs in his eyes. Seems he had woodlot full of 14 inch + old rock maple. Without contacting the marketing board to give him some advice and to look over his stock, he calls the neighbor with a tractor. They start cutting and yarding with a tractor and winch and bring the stuff out to a field. They had quite a pile started and then decided to call the marketing board. The marketing board staff comes along with a veneer buyer and has a look at the pile of maple. As soon as the buyer seen the large heart in the logs piled up he said he wasn't interested. What didn't end up for firewood, went on it's way to the grinder at the Kraft pulp mill in Nackawick.  ::) Almost make a man sick to cut those large (for here) trees and not be able to get veneer or logs from them. But, that's just typical of those large old hardwood. And 95 % of the time if the big old ones are leaning hard, you can forget about anything but firewood or pulp. I don't know why they tend to get a lean to them. I've seen that on private woodlots and crownlands.

cheers
Move'n on.

Offline Ron Scott

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Re: Tax advice needed
« Reply #11 on: July 06, 2011, 07:32:11 PM »
INCOME TAX DEDUCTION FOR TIMBER CASUALTY LOSS

Linda Wang, USFS, has provided a June 2011 update. 

You can find the 2-page document on-line at [ http://scforestry.org/Portals/0/TimberCasualtyLossTaxDeduction-2011.pdf ].
Alternatively, Bill Cook can send you the PDF via email if you ask [cookwi@msu.edu]. 
~Ron

Offline shelbycharger400

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Re: Tax advice needed
« Reply #12 on: July 10, 2011, 10:04:31 PM »
14 in dia big leaf i picked up, most of the heartwood is in the range of a 4 in + circle :(


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