Need somebody with some experience in this area...
My client is not in the business of growing, cultivating, or managing timberland or forestry. My client inherited a relatively small parcel of land over 30 years ago when his father died. This is the first time since my client inherited the land that timber has been cut and sold.
The land has been unoccupied and has not been used for any purpose, nor has it generated any other income of any type. I am tentatively taking the position that the land was "property held for investment." At one time there were a few dwellings on the property, but they were unoccupied, and they were in an uninhabitable condition. They were torn down several years ago.
My client received a Form 1099-S for the proceeds of the timber sale.
The amount of money involved, relatively speaking, is microscopic. The gross proceeds were under $10,000.
My research is leading me to the conclusion that the proceeds of the timber sale must be reported on Schedule D, and that something called Form T may be involved. It appears that my client may have a basis in the timber that was sold.
This is getting really complicated really fast. [LMAO]
Can someone give me the Cliff's Notes version of this?
I am tentatively prepared to make the following assumptions:
(i) The timber was sold as stumpage, i.e., standing timber, on a pay-as-cut contract.
(ii) Although the land was inherited over 30 years ago, I do not anticipate a significant problem in determining the basis of the land.
(iii) There have been no improvements made to the land since it was inherited.
(iv) There are no meaningful expenses associated with the sale of the timber, except possibly the cost of a surveyor's report.
(v) The client did not cut the timber and then sell it. The timber was cut by the party who bought it. The gross proceeds are effectively net proceeds.
The only other complication is that the 1099-S was issued to my client as an individual, and he then distributed the proceeds in equal shares to some other individuals who jointly own the land with him. But I know how to deal with that. My client probably has to issue Form 1099-S to each person who received a share of the proceeds.
How exactly do the proceeds of the sale get reported? Is there really some sort of basis to the timber itself?
Burton
My client is not in the business of growing, cultivating, or managing timberland or forestry. My client inherited a relatively small parcel of land over 30 years ago when his father died. This is the first time since my client inherited the land that timber has been cut and sold.
The land has been unoccupied and has not been used for any purpose, nor has it generated any other income of any type. I am tentatively taking the position that the land was "property held for investment." At one time there were a few dwellings on the property, but they were unoccupied, and they were in an uninhabitable condition. They were torn down several years ago.
My client received a Form 1099-S for the proceeds of the timber sale.
The amount of money involved, relatively speaking, is microscopic. The gross proceeds were under $10,000.
My research is leading me to the conclusion that the proceeds of the timber sale must be reported on Schedule D, and that something called Form T may be involved. It appears that my client may have a basis in the timber that was sold.
This is getting really complicated really fast. [LMAO]
Can someone give me the Cliff's Notes version of this?
I am tentatively prepared to make the following assumptions:
(i) The timber was sold as stumpage, i.e., standing timber, on a pay-as-cut contract.
(ii) Although the land was inherited over 30 years ago, I do not anticipate a significant problem in determining the basis of the land.
(iii) There have been no improvements made to the land since it was inherited.
(iv) There are no meaningful expenses associated with the sale of the timber, except possibly the cost of a surveyor's report.
(v) The client did not cut the timber and then sell it. The timber was cut by the party who bought it. The gross proceeds are effectively net proceeds.
The only other complication is that the 1099-S was issued to my client as an individual, and he then distributed the proceeds in equal shares to some other individuals who jointly own the land with him. But I know how to deal with that. My client probably has to issue Form 1099-S to each person who received a share of the proceeds.
How exactly do the proceeds of the sale get reported? Is there really some sort of basis to the timber itself?
Burton
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