GOALS OF THE JMF TIMBER PRACTICE GROUPAs a reputable accounting firm in West Alabama forover 90 years, JamisonMoneyFarmer PC has vastexperience working with clients in the timberindustry. We have made it our priority to assist ourclients in understanding the complicated tax lawssurrounding timber.
Understanding these lawsis essential to optimizingour client’s tax situation.We work with timbermills, timber managers,timber farmers andclients that hold timberfor investment to makesure they are maximizingtheir deductions andclassifying their timberincome correctly.
JMF offers tax planning, education seminars,consulting and various other services relatedto timber management and timberinvestments. Our experienced timber expertscan keep you up to date on all timber-relatedlaw changes and make sure that you areoptimizing your tax situation.
In light of the widespread storm damage from the recent Alabama Tornados, forest owners need to beaware of the tax rules related to deducting losses from storm damage and deferringtaxable income that may have arisen from salvaged timber proceeds. What do you need tominimize the effect of taxes after the loss of timber?
What do you need to claim a timber casualtyloss?1. A FORESTER to measure and document the decline in value of your timber2. BASIS in the timber3. Proof of OWNERSHIP4. PHOTOGRAPHS of the damage5. Proof of ATTEMPT to SALVAGE the damaged timber6. A CPA to assist you with calculating the loss
Things to remember• If you have NO basis (cost) in the timber you will have NO tax losses to deduct
Things to remember• Timber casualty losses are limited to the lesser of; – Decline in fair market value, or – Timber Basis• You can use the entire basis in a “single identifiable property” (SIP) to claim a loss up to the value of the loss. A SIP is the depletion block of timber – which varies by owner.
To Claim the Loss• You may claim 2011 storm damage losses in the Presidentially Declared Disaster Areas on your 2010 tax return if you elect to do so.• Timber losses may be a business casualty loss which yields better tax benefits than a personal casualty loss.
TREATMENT OF GAINSSALVAGE OR INSURANCE PROCEEDS IN EXCESS OF BASIS WILLRESULT IN A GAIN.1. Reinvest the Gain2. Recognize the Gain
Reinvest the Gain• The gain can likely be deferred if you plan to reinvest the proceeds.• If the damaged timber was in a Presidentially Declared Disaster Area, you can reinvest the proceeds in a broad range of business or investment property.• It does not have to be timber to defer the gain.
Recognize the Gain• It may be better to go ahead and pay the tax on capital gains.• You can pay tax at a lesser rate on Long-Term Capital Gains• Be able to deduct reforestation expenses at higher ordinary income rates.
The JMF Timber Practice Group isavailable to assist you with your timber tax issues as well as your Estate Planning needs.• Check us out at www.jmf.com and look for the Timber Industry page.• Contact us at 205-345-8440