Timber Sales

[taxgirl26]

Need to find basis for sale of timber. I have only sale amount & property info on how many units (acres).

[Lion EA]

TimberTax.org is a wealth of information.

Look for the appraisal of the timber at the time of purchase/inheritance/gift or maybe an appraisal when they sold some timber.

[Lee B]

Unless your client provides you a lot more information, the basis is $ 0

For starters date of acquisition, purchase price, allocation of purchase price, was there a timber cruise valuation etc etc

[Lee B]

Alternatively, if they planted the trees, then you have a completely different scenario i.e. possibly capitalized reforestation expenses etc.

[DANRVAN]

On 3/12/2021 at 9:32 AM, taxgirl26 said:

Need to find basis for sale of timber

To determine basis of timber you need to know:

-estimated age of timber sold

-volume sold

-growth rate for the species

-price per mfb date of acquisition.

You then work backwards to determine the volume and mill price at date of acquisition.   There lies the basis of the timber sold which you subtract from the land basis.

Another CPA I know uses the "Look Up" method.

That is where you look up at the ceiling and pull out a number.  That is evident from some of his work I have followed.

A timber cruise or appraisal will estimate the value of the standing timber at a given time;  but it won't tell you the basis of the timber that was loaded on a truck and hauled to the mill.

A timber consultant or forester involved in the sale can be a great resource.  Also need to consider the cost vs potential tax benefit.