Timber Tax Advice

The federal estate tax is of great concern to many family forest owners. This concern is valid if your estate will be subject to the tax, but most estates are not. An estate tax return must be filed if the gross estate exceeds the excludable amount, but this doesn’t mean any tax is due. The excludable amount gradually increased from $675,000 in 2001 to $3.5 million in 2009. It was repealed for deaths in 2010, but later reinstated for 2010 estates of $5.0 million or more electing to not be... read more

With the exception of property taxes, non-capital expenses for the management of forest land are deductible only if the taxpayer has a profit motive. Profit is broadly defined to include appreciation in the value of assets, including timber and land. Increases in these values is how many forest landowners show their intention to make a profit.    Forest landowners are frequently required or requested to incur costs primarily to improve the environment, not their profit. Many... read more

It’s hard to imagine any circumstances under which our U. S. Senators and Representatives would have sufficient support from constituents to engage in a process leading to simplification. The sectors of our economy tied to specific tax provisions are endless. These provisions can all be justified individually. Usually it’s the critical nature of a sector to the viability of our economy and way of life. Others are based on attempts to strive for economic and social justice. The analogy of a... read more

  Generally Forest land has many new roles in our economy. Recognition of the environmental services provided is reflected in payments for carbon sequestration[1] and watershed services,[2] among others. The use of conservation easements is expanding to include these additional goals. As with any new economic activity existing contract and tax law applies unless modified by legislation, the courts, or rulings of the IRS or state revenue agencies. When there is established authority for... read more

My last column focused on the tax treatment of payments for sequestering carbon.  The discussion assumed that payments constituted rent because the landowner had not disposed of either the land or the timber.  In my next column I'll discuss carbon sequestration contracts that may constitute a disposal and therefore require capital gains treatment of some portion of the payments received.  In this column I look more closely at the treatment of rental activities. This discussion... read more