Timber

[Donanita]

Have checked IRS pubs and TTB on the sale of timber but it is still clear as mudd.
Client bought land for $45000 two years ago.Had timber valued before cut by a forester and timber value was $36540. Value of timber harvested was $25193.04. Tons or board ft cut was 946.13. Is there more info I need from the client? I tried to work out the depletion but came up with outragus numbers.Are there any other website to check out.Would apprecate any help.

[erchess]

Why are you trying to caclulate depletion

on the timber? I would have thought that depletion was for non renewable resources such as minerals or oil. Can you imagine doing depletion on say a field of corn?

If you are looking for his basis in the timber, I believe that he has none unless the sales contract on the land specifies a value for the timber or he had the US Forest Service give him a value close to the time of sale. This is simply what I was taught, and I have never seen it in writing. I do know that I once lost a client because he did not believe me but he was back two years later because the IRS had convinced him that I was right. I should note that I very seldom knowingly go against a stated IRS position because I seldom have a client who could afford to fight the service in court. I always discuss with a client how much stomach they have for fighting with thee IRS. I do so in general terms at the beginning of the interview and then in specific terms if in my opinion more than one possible treatment of something stands at least a 50-50 chance of being upheld..

[Grumpy]

You might find some helpful info at: http://www.timbertax.org/

I can't be sure how helpful it may be because where I live timber is not an issue with which I have to deal.

[ChEAr$]

one fact missing

Have checked IRS pubs and TTB on the sale of timber but it is still clear as mudd.
Client bought land for $45000 two years ago.Had timber valued before cut by a forester and timber value was $36540. Value of timber harvested was $25193.04. Tons or board ft cut was 946.13. Is there more info I need from the client? I tried to work out the depletion but came up with outragus numbers.Are there any other website to check out.Would apprecate any help.

Since you have the value of the timber when bought, do you also have the estimated board
feet at that time? that's what you need in order to prorate the amount cut divided by total
originally bought. that percentage timesm the 36540 will give you basis in timber sold.

simple, eh what?

[Donanita]

Board Feet

Since you have the value of the timber when bought, do you also have the estimated board
feet at that time? that's what you need in order to prorate the amount cut divided by total
originally bought. that percentage timesm the 36540 will give you basis in timber sold.

simple, eh what?

This is where I get confused the forester had mbf at 1080 before the cut but after the cut he has the 946.13 listed as tons. Like the other poster, in the past I have just put the sale on a Sch D with no basis but if I the client can get a basis and save paying taxes I am trying to see what can be done.

[JG EA]

Form T

To claim depletion on Timber use Form T. A fun form. Also, unless you have a forester in the office, you need to have the client do a backwards cruise to see how much value was in the specific types of timberwhen he bought the land, the total of each type, how much was cut, etc. You cannot use percentages on timber.

[ChEAr$]

basis

This is where I get confused the forester had mbf at 1080 before the cut but after the cut he has the 946.13 listed as tons. Like the other poster, in the past I have just put the sale on a Sch D with no basis but if I the client can get a basis and save paying taxes I am trying to see what can be done.

Well there you have it. Basis will be 946/1080 times total basis. OH, about 88%?

[ChEAr$]

It's Loosana

Most likely is all pine.

[Grumpy]

Just curious - How can you divide mbf by tons? As I said before, I live where this doesn't occur, so I am not being smart-alecky, ust curious.

[xgflek]

You can't

You will have to convert one or the other from mbf to tons or vice versa. There are conversion factors available dependent on species and log rule used to determine the mbf quantity. You should be able to google the conversion factors dependent on your situation.
Just one other note I thought of when reading the post is you will want to keep in mind is on the original purchase was the raw land worth $8460, (the difference between the $45000 paid and the $36540 in timber value) It is possible that the purchase price is less than the total FMV of timber and land, and as such you may need to reduce the basis in timber to account for the residual value of the land (what the land would be worth with no trees) at the time of purchase. (Example: You paid 45000, the raw land is worth 25000, your basis in standing timber is $20000, you purchased the $36540 of value at a discounted price).