Table of Contents
- Part I. Acquisitions
- Part II. Timber Depletion
- Part III. Profit or Loss From Land and Timber Sales
- Part IV. Reforestation and Timber Stand Activities
- Part V. Land Ownership
Complete this part if you acquired timber, timber-cutting contracts, or forest land during the tax year, whether the acquisition was by purchase, exchange, gift, or inheritance.
Report acquisitions during the tax year (whether taxable or not) of timber, timber-cutting contracts, or forest land. Report separately each acquisition of $10,000 or more.
You may combine acquisitions of less than $10,000 for each account and omit lines 2 and 3. For an acquisition by gift or inheritance, skip lines 4 through 7.
For an acquisition or lease of timber-cutting rights on a pay-as-cut basis, except for those under which all cutting is completed within the tax year, do not complete lines 4 through 8. Instead, list the provisions of the purchase or lease agreement, including the number of years from the effective date to the expiration date, annual minimum cut or payment, and the payment rates for different kinds of timber and forest products. Follow the format of lines 1 through 9 on additional sheets if necessary.
You must include your timber in one or more accounts. Generally, each account must include all your timber that is located in one “block.” A block may be:
An operational unit that includes all timber that would logically go to a single point of manufacture,
A logging unit that includes all timber that would logically be removed by a single logging development, or
An area established by the geographical or political boundaries of logical management areas. Timber acquired under a cutting contract may not be included in part of a block, but should be kept in a separate account.
For exceptional cases, the timber in a given block may be divided into two or more accounts. See Regulations section 1.611-3(d) for more information.
Complete this part for each timber account that has changed in quantity or dollar amount. A timber account may change in quantity or dollar amount as a result of acquisitions, dispositions, the cutting of timber, capitalized expenditures, casualty or theft losses, corrections, additions for growth, and transfers from other accounts. Use this part to figure depletion for timber cut or the basis for timber sold or lost during the tax year. A depletion schedule is required to be maintained for all types of timber ownership.
Provide data for each timber account separately. Account for any changes that have occurred during the tax year. Attach as many additional pages as needed. If you deplete on a block basis, combine new purchases with the opening balances and use the average depletion rate shown on line 8, column (b), for all timber cut or sold, regardless of how long held.
The casualty loss limitation is determined by the decrease in fair market value (FMV) of the Single Identifiable Property (block) before and after the casualty event, not to exceed the basis in the affected block. Keep FMV appraisals in your records to support the claimed loss (see Recordkeeping, earlier).
If you are making the 631(a) election, or have made the election in a prior tax year, check the “Yes” box on line 18a.
The 631(a) election cannot be made on an amended return.
You must maintain the following records.
Location of the sawmill, log market, or other point of delivery of the logs or wood to the user or buyer.
The total MBF, log scale, cords, or other units of timber cut, and the length and diameter of the average log or the average number of units per tree.
The percentage of rough lumber grades, by species, manufactured from the timber during the year, or, if cut timber is sold as logs, the percentage of log grades, by species.
If you are revoking your 631(a) election, check the “Yes” box.
If you made a section 631(a) election for any tax year ending before October 23, 2004, you can revoke that election without the consent of the IRS for any tax year ending after October 22, 2004. The prior election (and revocation) is disregarded for purposes of making a subsequent election. Unless this special rule applies, or the election was made for a tax year beginning before 1987, you can only revoke a section 631(a) election with IRS consent.
Complete this part to report all dispositions of timber, timber-cutting contracts, or forest land during the tax year (whether taxable or not). Do not report dispositions by gift or distributions made by an estate or to a beneficiary.
Report each sale involving total consideration of $10,000 or more. You may combine sales of less than $10,000 for each timber or land account and omit lines 2 and 3 for each combined small sale.
Summarize your expenditures for reforestation and timber stand activities during the tax year. Timber stand activities include all silvicultural prescriptions (such as burning, spraying, and thinning) applied to a timber stand regardless of age.
By entering an amount on this line, you are indicating that you have elected to deduct qualifying reforestation expenses that were paid or incurred after October 22, 2004, for each qualified timber property under section 194(b). You must complete line 1 of Part IV listing the following:
The account, block, tract, area or stand identification number for each qualified timber property (QTP);
The kind of activity (burning, chopping, spraying, planting, seeding, thinning, pruning, fertilizing, etc.);
The number of acres treated; and
The total expenditures.
The aggregate amount of reforestation expenses which can be claimed on line 4a for any tax year cannot exceed $10,000 ($5,000 if your filing status is married filing separately) for each qualified timber property for any tax year. The remaining costs (line 4b) can be amortized over an 84-month period using the half-year convention under section 194(a). For more information on reforestation costs, see Pub. 535.
If you do not elect to deduct reforestation expenses under section 194(b), all reforestation expenses will be capitalized in a deferred timber depletion account.
Reforestation expenses are direct costs incurred for reforestation by planting or artificial or natural seeding. This includes costs for the preparation of the site, of seeds or seedlings, and for labor and tools, including depreciation of equipment such as tractors, trucks, tree planters, and similar machines used in planting or seeding.
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