Forest accounting is complicated. Where a section 194(b) reforestation deduction is entered depends on the overall amount invested and whether the particular forest stand (the "Qualifying Timber Property") is held as a passive investment, an active business, or a farm (and a forest is not ipso facto a farm). I highly recommend the "Forest Landowner's Guide to the Federal Income Tax."
By election, up to $10,000 can be expensed, with the excess amortized over 84 months, and not added to basis. Otherwise, the entire amount is capitalized and added to basis.
If Form T is otherwise required to be filed for the tax year, the election to expense and/or amortize should be there in Part IV.
If Form T is not otherwise required, a detailed statement is required with the tax return "that shows (1) the unique stand identifier of each QTP for which you are taking a deduction, (2) the total number of acres reforested during the tax year, (3) the nature of the reforestation treatment, and (4) the total amounts of qualified reforestation expenses eligible to be amortized under IRC section 194(a) or deducted under IRC section 194(b)."
For a forest held as an investment, the deduction is itemized on Schedule A. For a business or a farm, it is an "other expense" filed on Schedule C or F, as is otherwise appropriate. Any excess over $10,000 is amortized.
Even when not required to be filed, Form T should be completed for your records, your sanity, and good business decision making, as detailed in the aforementioned guide.
