HOW DO I REFLECT SALE OF TIMBER ACKNOLEDGED WITH A 1099-S AS INCOME ON MY SCHEDULE F INSTEAD OF A CAPITAL GAINS ON AN INVESTMENT?

[Cattlerancher · Accepted solution]

You don't. Not if reported on a 1099-S. Timber sales are not considered earned income. Timber takes generations to grow so it's capitalized. It often grows on farms but on it's own, not cultivated. Also be aware that profits from schedule F are subject to Federal and State income tax plus an additional 15.3% SE tax.

There is one exception;

Standing timber you held as investment property is a capital asset. Gain or loss from its sale is capital gain or loss reported on Form 8949 and Schedule D (Form 1040), as applicable. If you held the timber primarily for sale to customers, it is not a capital asset. Gain or loss on its sale is ordinary business income or loss. It is reported on Schedule F, line 1 (purchased timber) or line 2 (raised timber). See the Instructions for Schedule F (Form 1040).

[ligijj]

HOW DO I CHOOSE THE EXCEPTION OF RAISED TIMBER ON Sch F ALTHOUGH I RECEIVED A 1099-S ?

[Cattlerancher]

This exception refers to the self employed person processing the logs themselves for sale to customers. I know a farmer who owns a saw mill and sells ruff cut 2X8 corral lumber from his own timber. You would not get a 1099-S in that case.