Which form for sale of forest land used for timber income?

[Tette]

Which form do I use to report sale of forest land used for timber income? Is it 1099-B?

I was not the owner of the forestry business.

[PattiF]

If you are reporting the sale of timberland that you owned, then you would report it as investment income which can be reported on a 1099-B.

• Click on the Wages & Income tab
• Next click on I'll choose what I work on
• Scroll down the screen until you come to the section Investment Income
• Chose Stocks, Mutual Funds, Bonds, Other and select Start or Update
• The first screen will ask if you sold any investments during the year, answer 
• Did you get a 1099-B or a brokerage statement for these sales? Answer No
• Tell us about this sale, Click I'll enter one sale at a time
• The drop-down boxes can be filled out with the details of the timber sale

1. Description - Timber parcel with general location or address
2. Date sold - from your records
3. Date acquired - from your records
4. Sale proceeds - from your records
5. Cost basis - initial purchase price plus expenses of the sale such as surveying, etc.

The timber sale will be recorded in your tax return.

[Tette]

@PattiF Thank you for your reply.

This was a foreign sale. Should the sale proceeds be written down pre-foreign tax, pre-expenses (gross proceeds)?

On page 3 of this section it says. "Select any less common adjustments that apply." And then -

"Fees or expenses not already deducted from reported sales price."  next to an empty check box.

Should I put the broker's fee and legal fee here, in addition to as expenses added to the cost basis?

[PattiF]

Yes, the proceeds would be pre-foreign tax and pre-expenses. 

Yes, you should add the expenses of the sale, the broker's fee, and legal fee, to the cost basis.

[Tette]

@PattiF. Thanks! If I could just ask one last question, under Deductions & Credits> Estimates and Other Taxes Paid > Foreign Taxes: Definitely Related Expenses, I put down the broker's fee and legal fees. Should these be Itemized Deductions or Deduction from Gross Income? I'm not sure if I should even be deducting these costs in this section.

[PattiF]

The foreign taxes paid would be entered on Form 1116. 

1. Open (continue) your return in TurboTax
2. Make sure you've already entered all your foreign income. If you still need to enter it, do that now
3. Select Search and search for foreign tax credit. Select the Jump to link in the search results
4. When you reach the screen Do You Want the Deduction or the Credit? select the option you prefer for your situation
5. If you select Take a Credit:
   • Select Continue on the next screen, then select No to fill out Form 1116
   • When you reach the screen Country Summary, select Add a Country
   • Answer the questions about your foreign income, taxes, and expenses on the following screens
   • When finished, you'll be taken back to the Country Summary screen. If you have income from other countries to enter, select Add a Country. Otherwise, select Done
   • Answer the questions on the following screens until you reach your Foreign Tax Credit Summary. If you’re finished with this section, select Done
6. If you select Itemized Deduction:
   • Enter your foreign taxes paid on the next screen. These should show up in the Deductions & Credits section of your tax return, under Other Deductible Expenses

The broker's fees and legal fees are expenses of the sale and added to the cost basis of the land when the sale is reported. The cost basis of the property is deducted from the proceeds of the sale to determine the gain. 

@Tette 

[Tette]

@PattyF

Thank you for the instructions. 

So it’s my understanding that the section I mentioned (Definitely Related Expenses, Part I, Line 2 of 1116) is only supposed to be filled out if you’re taking a deduction. It showed up in the questions even though I chose to take the credit.