Family farm, et al & Timber

[Sherill]

Client has nothing more than an 80 acre family farm, et al, used for hunting purposes. Family must cut timber and will probably reap $22,000 (thereabouts).
Who could claim 1099-T, a surviving grandparent, working parent, or a child, and pay the least in taxes?

[Unregistered]

timber

This should be long term capital gain subject to max 15% tax, see web site for more information on timber--http://www.timbertax.org/

[Snaggletooth]

Ownership

Sherrill, the answer to your question is simple -- who is the owner of the timber? THAT is the party who reports the sale.

Sounds like you have been asked by one of these family members "Which one of us needs to 'show' the sale? Which one of us would have the least taxes?" They think they have the option of grandkids, grandparents, uncles removed, or cousins as possibilities, when the only real answer is the OWNER. Period.

[RLymanC]

Timber Sale

Might add that you will probably not need to file Form T for this type of timber sale. Get the instructions for Form T to detremine this.

You will however have to establish the original cost per thousand board feet of all original timber on the property plus a percentage of per year growth rate over the years to establish total board feet at time of sale. Subtract the cost basis per thousand from the per thousand sale price to arrive at capital gain/loss.

You may be able to get some growth rate percentages from logging companies or a saw mill in your area.

[danielle]

It is my understanding that basis in the timber would be based on what was paid for the property as a whole. This price would then be assigned to land and timber in appropriate proportions as determined by appraisal.

Basis can only be deducted by depletion which requires use of Form T. I realize many people just put the sale on Schedule D without Form T but it is my understanding that this is not correct.

Please advise if I have been wrong in my thinking and application of this.

[RLymanC]

Form T

Please read the exceptions under "Who Must File" on Form T instructions. It's very rare that a small amount of timber sold occationally will ever file form T. Just keep a record of the original volumn, the amount cutand the timber remaining plus growth rate in case of a future sale.

Form T is for the big boy's, not the little guy that cut's a few tree's once in awhile.

[JG EA]

Ps

Don't forget that if they held the property for a long time there may have been no trees and so no basis in them. You can hire backwards cruises to see the value of your trees sold at the time property was purchased.

[danielle]

Am I missing something?

Form T instructions under who must file states that if you claim a deduction for depletion you must complete and attach Form T.

Depletion is only way to recover basis in timber.

[wv112]

Good site for timber tax questions.

http://www.timbertax.com/

[JG EA]

I think you are right.

Am I missing something?
Form T instructions under who must file states that if you claim a deduction for depletion you must complete and attach Form T.
Depletion is only way to recover basis in timber.

My point was there may be no basis - No Form T

Or there may be a basis, but there should be a cruise. No percentages are allowed in figuring basis in trees - Form T needed.