An update to the guide to federal income tax regulations affecting the owners of private forests is now available online as a downloadable file at www.fs.fed.us/spf/coop/
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Tax Tips from the Virginia Forest Landowner Update
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It’s tax time again. And for the thousands of Virginia forest landowners that harvested timber during 2000, reporting taxes will be an extra challenge. While generating timber revenue is not the primary objective for most woodland owners, over 50 percent of all Virginia forest landowners have harvested timber in the past. Of those who have not, 40 percent intend to cut in the next ten years. Unfortunately, most landowners conduct timber sales with little or no planning. Trees are big money in the Southeast and timber sale revenue can easily bump landowners into the next tax bracket. Whether you cut timber this year or in the future, there are steps all landowners should take now to reduce their tax burden. The following resources are recommended to provide educational, not legal, advice by helping landowners interpret the Internal Revenue Code (IRC) and aid landowners in asking the right questions of their foresters, lawyers, and accountants. All resources are available over the internet and websites are listed immediately below the resource. The bottom line for conducting a timber sale (or any forest management activity) is that financial and ecological mistakes occur most frequently in the absence of a plan. Plan before you act! The National Timber Tax Website is a one-stop shop for forest landowners, accountants, attorneys, and consultant foresters unfamiliar with the "tax treatment of timber," or who want to learn about recent changes in the tax code that affect timberland ownership. This website contains major sections on tax strategies, financial and estate planning, and new developments including recent changes to the IRC, recent case law, and new or proposed legislation. In addition, the site contains links to state and federal tax forms, instructions and publications, full text of relevant sections of the IRC, summary of state timber tax laws, links to other tax sites, state and federal natural resource agencies and more. An excellent tax resource. Tax Tips for Forest Landowners for the 2000 Tax Year is an annual two-page report reviewing important tax strategies for forest landowners and highlighting important new developments in federal timber tax regulations. Strategies include establishing your basis, understanding passive loss rules, capital gains and self-employment taxes, cost-share payments, casualty losses, and management and maintenance expenses. Author Larry Bishop notes that landowners will generally receive the best tax treatment if they are classified as "materially participating" in a timber business. Under this classification, all management expenses, property taxes, and interest on indebtedness are fully deductible against income from any source. However, to claim and support materail participation, landowners must keep good records. Good recordkeeping and other important tax filing points are also summarized. Forest Owner’s Guide to the Federal Income Tax is the definitive resource for woodland owners and tax professionals on forest land taxation. In addition to presenting methods of analyzing forestry investments and explaining the Federal income tax as it pertains to timber, this guide also provides a system and blank forms to enable landowners to keep the necessary records for tax purposes and to assist landowners in more effectively managing timber investments. The guide clearly explains timber management and investment concepts, and uses real-world examples to explain: cost and income considerations; casualties, thefts, and condemnations; Christmas tree production; conservation easements; business organization; recordkeeping; appeals procedures; and sources of tax assistance. Also known as USDA Agriculture Handbook No. 708, the guide is current as of January 1995, is now being revised, and may be available in January 2001 as Ag. Handbook No. 718. Copies are $15.00 and may be ordered through the U.S. Government Bookstore, First Union Plaza, Suite 120, 999 Peachtree St., NE, Atlanta, GA 30309-3964; phone 404/347-1900. Do you have an estate plan? The answer is yes! If you haven’t planned for your estate, your State has a plan for you (but probably not the one you want)! Estate Planning for Forest Landowners is a critical reference for woodland owners in developing strategies to transfer their woodland estates. The guide is designed to provide landowners with a working knowledge of the Federal estate and gift tax law as it relates to estate planning for timberland owners. Divided into four main sections, the guide discusses: the foundations of estate planning; general estate planning tools; forestry-specific estate planning tools; and various forms of timberland ownership, alternative business structures for timber estates, and State death taxes. This comprehensive guide also includes an appendix with a glossary, selected IRS tables, selected tax forms, and a list of selected additional readings on estate planning. No longer available in hard copy. Other Tax Resources Both Forest Landowners Magazine (Forest Landowners Association, P.O. Box 95385, Atlanta, GA 30347-0385; phone: 404/325-2954), and Virginia Forests Magazine (Virginia Forestry Association; 8810-B Patterson Ave., Richmond, VA 23229-6322; phone: 804/741-0836) contain excellent woodland taxation columns in each edition. Annual membership dues (including magazine subscriptions) range upward from $40.00 for either organization. |
For more information, please contact Dylan Jenkins, Editor, Virginia Forest Landowner Update at: Virginia Tech Department of Forestry, 216-B Cheatham Hall (0324), Blacksburg, Virginia 24061; phone: 540/231-6391;
fax: 540/231-3330; dylan@vt.edu
