Capital Gain for Timber Harvest and Land Sale

Forum|Forum|6 years ago
November 14, 2019
2 replies
60 views

I'm looking for some insight to how my proceeds will be taxed.

I harvested timber from land I inherited over a year ago. Let's say I received $30k for the harvest. My timber basis (provided by registered forester) was approx. $28k. Therefore I would pay capital gain tax on approx. $2k I earned, correct?

Now let's say the tax assessed value was $55k when I received the property. Now that the timber is gone I assume the tax assessed value is decreased. So if I were to sell the property (minus timber) for say $35k, would there be a new "land basis" to determine by gains or loss? If I compared the sale to todays assessed value I would have a $20k loss. If there is a new land basis, say $30k, then I would have $5k in gains. Any insight would be greatly appreciated!

smarttees

Level 5

You should look at this website Timber

Hal_Al

Level 15

The cost basis, in the property you inherited was the fair market value on the date of death. That may or may not be the same as the property tax assessed value. For sake of discussion, let's say it is. Then, your cost basis is $55,000. The forester says that $28,000 of that was for timber. That means your cost basis in land is $27,000 ($55K - 28K = 27K).

If you sell the land for $35,000, you will have a long term* capital gain, on the land sale of $8,000 (35K - 27K = 8K).

*Inherited property is considered long term regardless of how long you actually owned it.