Client sold timber for $250000. Wanted a basis.I told them unless the timber was valued at the time of purchase they didn't have a basis unless they had replanted and this was the cut timber.They were told a CPA across town had a formula from the IRA that would give a basis. Do any of you know of a formula that will figure a basis for timber.Told clients I would check this out but I was not aware of a formula.
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TTB, page 5-28 gives you the formula for figuring cost depletion for timber. As you said, there had to be basis in the trees cut. But the basis does not necessarily have to be the actual cost of buying the trees and planting them. Basis for cost depletion is basically the cost of the land acquired, minus the residual value of the land after all trees have been stripped off the land. Obviously if you have been holding on to the land for years, the appreciation in land value could wipe out any basis for cost depletion purposes. But if you buy a tract of land today for $100,000, and six months later you strip off all the trees which causes the value of the land to drop $50,000, then you have a basis for cost depletion purposes. -
Thanks Brad
Clients bought land 20 years ago so land value would knock out any depletion.Comment
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The following website may help:
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