Standing Timber

Today TaxMama hears from Anita in Fair Oaks, CA who tells us: “We own a few acres of land full of trees. We did timber harvesting. Can we adjust the tax basis of the land as, probably, the land value has decreased due to the harvesting of timber? Do we get depletion allowance?”

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Dear Anita,

Good questions.

But, you don’t get to adjust the basis of the land when you sell trees. The money from the sale of the trees is taxable income.

Do you get a depletion allowance. Hmmmm….I’d never thought about that. But I can’t think why.

The land is still there. You haven’t removed any land, as you do in strip mining.

You should not have simply removed the trees, if you have any sense. Most people today who harvest trees on their land also replant replacements. Hopefully, you insisted that the folks doing your harvesting engage in reforestation, as well.

But, I did come across this citation from IRS Publication 535 that refers to a depletion allowance for standing timber.
http://www.mobdn.net/irs/taxmap/pubs/p535-051.htm

Here’s an article on how to handle the depletion allowance. It’s a 2005 article by Karen Potter-Witter, Professor, Department of Forestry:
http://forestry.msu.edu/extension/extdocs/facts1.pdf

I hope this helps. Clearly , handled property, that stand of timber will last you forever.

And remember, you’ll find answers to lots of questions about depletion and other tax information, free. Where? At TaxMama.com

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