As a general rule if you only occasionally sell timber (one or two sales every three or four years) you are not in the timber business. If you sell timber that you inherited you are considered to have held it for more than one year and report it as a long-term gain. If you have a multi-member LLC that is taxed as a partnership (Form 1065) enter as follows:
- Click on the Federal Tax tab
- Click on the Income tab
- Under Investment Income, select Capital gains or losses - click on Start
- The program will as you if you have and sales of non-portfolio assets to enter. Indicate that none are non-portfolio asset sales.
- Select Enter as a Single Entry
- When you enter your transaction use "Various" as your acquisition date
You may be able to recover your cost basis in the timber sold, also referred to as a depletion allowance. See the National Timber Tax Website http://www.timbertax.org for information on this possibility. You should also any expenses you incurred for the sale of the timber.
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