Forest Stand Improvement Grant

[joemalone1967]

How do I record a forest stand improvement grant (1099-G) and the expenses which were paid from the grant?? 

[ColeenD3]

Follow the steps below. If this applies to a Farm, you can take expenses on Schedule F. Please see this LINK for more information.

To include your 1099-G received for a taxable grant:

1. Open or continue your return in TurboTax
2. Go to Other Common Income.
3. Click on 1099-G Income.
4. Check Yes we need to enter 1099-G for a government payment.
5. Enter the information requested on screen.
6. On what type of payment did you receive, click Taxable grant
7. Enter the information listed on your 1099-G
8. Click on Continue

[joemalone1967]

Where do I enter the expenses (Forest Stand Improvements) which were paid by the grant funds??

[ColeenD3]

Unless you have a Farm, there is no way to do it.

 From Pub 225:

Agricultural Program Payments

You must include in income most government payments, such as those for approved conservation practices, livestock indemnity payments, or livestock forage disaster payments whether you receive them in cash, materials, services, or commodity certificates. However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. See Cost-Sharing Exclusion (Improvements), later.

Report the agricultural program payment on the appropriate line of Schedule F, Part I. Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Claim the deduction on Schedule F, Part II, for the year of repayment or reduction.

[joemalone1967]

This grant was for Forest Standard Improvement in the amount of $53,000.  Actual expenses for the project (brush removal, spraying, etc...) were $65,000.  How should this these transactions be recorded on a tax return??   Or can this be reported on a Schedule F and and show a $12,000 loss??

[KrisD15]

The grant must be claimed as personal income. If you file Schedule F, you can enter the expenses there. 

[joemalone1967]

The only income for the taxpayer was the $54,000 grant which will be reported on Schedule F, 4a in Part 1.  Taxpayer spent $65,000 in forest stand improvement, weed treatment and brush management/removal.  Can the entire $65,000 be reported as operating expenses??

[DawnC]

Farm operating expenses and farm income are both entered on Schedule F.    You can deduct any cost you incur that's an ordinary and necessary expense of farming on Schedule F to reduce the profit—or increase the loss—on which you'll owe taxes. Some of the expenses that farmers commonly deduct cover the cost of livestock and feed, seeds, fertilizer, wages paid to employees, interest paid during the year on farm-related loans, depreciation to recover a portion of equipment costs, utilities, and insurance premiums.    There is not a category for operating expenses - they are entered in the category they fall in and are reported on Schedule F on the related line item.   There is a miscellaneous category at the end of the farm entry process (Line 32).    You can see the expense and income categories of Schedule F here.  

[joemalone1967]

Can all the Forest Stand Improvement costs be recorded as an operating expense or does a portion need to be amortized??  Can all the Brush Management costs be recorded as an conservation expense in the year paid??

[ColeenD3]

If it is an expense, not start up or asset, then you can claim the entire amount in the year paid.

Start up costs are those expenses incurred in planning and setting up the business, costs you incur before you open the door.

A portion of startup and organizational costs can be expensed (written off in your first year). The remainder can be amortized (written off over a period of 15 or more years).

Here is how it works:

Expenses paid or incurred after October 22, 2004: 

 - You can deduct up to $5,000 in startup and $5,000 organizational costs as current expenses if the costs are under $50,000, respectively.

 - You can choose to amortize startup and organizational costs greater than $5,000, respectively, (but less than $50,000, respectively) over a period of 15 years.

 - If your startup or your organizational costs are more than $50,000, respectively, the excess amount reduces the amount you can deduct.