n today’s marketplace of explosive and unpredictable technology
stocks where fortunes can be made and lost in a matter of minutes, choosing an investment
that can take 30 or more years before turning a profit may seem decidedly low tech. n today’s marketplace of explosive and unpredictable technology
stocks where fortunes can be made and lost in a matter of minutes, choosing an investment
that can take 30 or more years before turning a profit may seem decidedly low tech.
But for the more than 600,000 private forest landowners in North Carolina, watching trees grow offers more than just magnificent scenery, wildlife habitat and woodland recreation; it also offers more opportunity for maximizing tax benefits and long-term profits than many higher tech investments.
Taxation of timber income and timber assets is a major concern of landowners. Proper accounting and planning can save a landowner thousands of dollars in taxes. It is imperative that landowners check with their tax advisor on the applicability of current tax laws and consult with a forester and an accountant to assist with tax planning and reporting.
To begin, a landowner must first determine the timber basis, which is a broad term used to determine the capital invested in property. The basis of property is usually the cost when first acquired or the free market value on date of death of property acquired by inheritance. The basis of a gift is the documented basis of the donor. Basis is used for calculating gain or loss on sales or exchanges, and for computing amortization, cost recovery, depletion and casualty loss deductions.
Income from cost share programs does not have to be claimed as income, but if not, then it cannot be added to basis.
In October of 2004, the President signed HR 4520, the American Jobs Creation Act. This bill included two major changes in federal tax policy that affect private landowners and forestry. The legislation amends the Internal Revenue Code (IRC) Section 631(b) to eliminate the requirement for timber sale contracts to contain a "retained economic interest" provision, which means that non-industrial private forest landowners will no longer be forced to sell under pay-as-cut contracts and will be able to use "lump sum" sales with no concern over the loss of capital gains treatment.
The other provision allows expensing of up to $10,000 for reforestation costs in the year of occurrence with an 84 month amortization of the remaining costs (a change from the current $10,000 tax credit).
These changes to the reforestation tax provisions are significant. Now a landowner can expense $10,000 in the year it is incurred and then expense the remaining amount over 84 months. The reforestation tax provision went into effect October 22, 2004. Note: Check current requirements as Congress continues to adjust federal tax provisions (www.timbertax.org) or contact Extension Forestry at N.C. State University.
Home *
Careers *
Continuing Education *
Ecology *
Forest
Management *
Forest
Products * Glossary
* Landowners
* Latest News
* Logging and
Transportation
* Members Only
* More Info * N.C. Forests
* Programs
*
*Recreation
* Resource
Materials * Rules &
Regs* Trees