Basis in trees?

[Possi]

Clients inherited a farm.

I have the value of the trees in detail, at the time of inheritance.

Trees were sold in 2011.

There was a loss, as storms damaged much of the timber.

Is this as simple as it seems? Basis at the time of inheritance. Sch D loss.

I just know there is a trick here somewhere. Can't be that simple.

In 2012, there will be reforestation expenses. Those expenses go on line 35 of the 1040. When those trees grow up and get sold, I'll either be dead or flashing the folks in the nursing home, so I really don't care about that basis!

[Koss]

Timber

You may or may not need to file Form T. In some cases, I think you need to complete the form and retain it as a worksheet; in other cases it is actually part of the return.

The tax treatment of timber sales hinges heavily on whether it is personal property, investment property, or business property.

You may well be getting it right, based on the facts and circumstances of your client. I've only done this once, and it was several years ago. But it can get very complicated very fast.

Check this out:

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

BMK

[Possi]

Personal property

Koss, thanks for the response. I didn't know a Sch T existed. That is just the kind of research I need to do.

It is personal, inherited property. I don't believe the 4 kids will ever get rid of this property, but I do know they re-planted for future sales.

I'll look at the T and see if this thick skull can learn anything!

[Snaggletooth]

Don't Know About Sch T

Can't think of a thing in the Sch T which will help you report a 2011 Sale of
Timber.

What would be convenient for you would be a ready-made basis in timber. Your odds might be better with winning the lottery. A professional forester would have had to estimate the value of the timber when the farm was acquired. When people buy land, how many do you know that call a professional forester? Usually, when this is done it is because the buyer wants to harvest the timber and clear the land.

There are growth rates for various species of trees, where you might conceivably "factor down" the current value to some sapling value in the distant past, but this would not take into account the viable timber at the time, which became too old to harvest over the years. Walnut, currently the rage of hardwood timbers, matures in about 50 years. If left standing longer than that, the tree will deteriorate. Pines can be harvested after 20 years after planting. Spruce, much earlier, if used for Christmas trees.

[Possi]

Ready made basis

[QUOTE=Snaggletooth;139373]Can't think of a thing in the Sch T which will help you report a 2011 Sale of
Timber.

What would be convenient for you would be a ready-made basis in timber. Your odds might be better with winning the lottery. A professional forester would have had to estimate the value of the timber when the farm was acquired. When people buy land, how many do you know that call a professional forester? Usually, when this is done it is because the buyer wants to harvest the timber and clear the land.

QUOTE]

That is exactly what I have! A ready-made basis in timber. Sweet, huh? Somebody knew what they were doing when these kids inherited this farm. They got the basis in the timber the day Momma died. Tree by tree. I'm not even kidding you.