I purchased forest land for a vacation home. Paid $60000 for the land 5 years ago. I have a 1099-S for sale of timber that was damaged by storm. What do I use for Basis?

Forum|Forum|6 years ago
September 11, 2020
4 replies
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Carl

Level 11

You'll use what you paid for the land as your cost basis. Since the IRS considers the sale of timber to be a type of business activity, you'll be reporting depletion (not depreciation) on IRS Form T. https://www.irs.gov/pub/irs-access/ft_accessible.pdf If you've never done this before, then understand it's not simple by any stretch of the imagination. Determining total value of all tember present, separate from what was sold can be complicated. You may find it more beneficial to your wallet to seek professional help. Especially if you state also taxes personal income.

mellish7777

Level 5

Are you sure about this Carl? Instructions for Form T say:

Who Must File

Complete and attach Form T to your income tax return only if you:

Claim a deduction for depletion of timber,
Elect under section 631(a) to treat the cutting of timber as a sale or exchange, or
Make an outright sale of timber under section 631(b).

It's cap gain mostly.

Critter-3

Level 15

Technically you sold the timber to the insurance company for the amount they paid you. Computing the value (basis) of the timber sold will be the issue. https://mylandplan.org/how-to-measure-the-timber-value-of-your-trees

Hal_Al

Level 15

Q. What do I use for Basis, on the sale of timber.

A. zero (most likely), unless you had an appraisal done, to determine the timber value, when you purchased the property.

The sale of timber is considered a capital gain.

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)

- Wages & Income

- “I’ll choose what I work on” Button

Scroll down to:

-Investment Income

-Stocks, mutual funds, Bonds, Other (Timber is other)

Select "No financial institution". Cost basis for timber is usually zero. Timber basis is not the cost of the property. For a discussion on Timber Basis, see https://www.extension.purdue.edu/extmedia/FNR/FNR_FAQ_2.pdf

Reference:http://www.timbertax.org/developments/Federal%20Income%20Tax%20on%20Timber-%20A%20Quick%20Guide%20for%20Woodland%20Owners.pdf