US Timber Sale Contracts

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Commonly Asked Questions about US Timber Sale Contracts

Is there capital gains tax on timber sales?

Understand timber sale income and capital gains tax In most cases, your income from a standing timber sale is taxed at the favorable long-term capital gains tax rate (0%, 15%, or 20% depending on your taxable income) if you have owned it for more than 1 year.

How do you calculate capital gains on timber?

The part that may be considered a capital gain is the difference between the timbers adjusted basis (see p. 12 through 15) and its fair market value as stumpage on the first day of the tax year when cut, less expenses directly associated with the cutting.

How do you report timber sales on a tax return?

In this case, the sale of the timber may be subject to long-term capital gains tax rates, which are typically lower than short-term capital gains tax rates. To report the sale of timber on your tax return, you may need to file Form 4797 or use Schedule C and/or Schedule F.

What are the different types of timber contracts?

There are three common types of payments involved in a timber sale contract: lump sum, per unit, and blended price. The lump sum payment is the simplest type. The landowner and timber buyer negotiate upfront, or by means of a sealed bid, a set price for the timber that will be harvested.

How to report timber sale on TurboTax?

How to enter Timber Sale Income For What type of investment did you sell? For Description enter Timber, For When did you receive this investment?, use the date you acquired the timber property. For cost basis, see Determining Timber Cost Basis | MU Extension or use another method that you can justify.

What is the tax treatment of the sale of timber?

Usually, income from the sale of standing timber that has been owned for more than 1 year qualifies for the favorable long-term capital gains tax rate (0, 15, or 20 percentdepending on your taxable income). Inherited timber automatically meets the long- term holding period requirement.

Does the US Forest Service lose money on timber sales?

Using Forest Service budget data, the group reports Tongass timber sales over the last four decades generated $227 million in revenue but cost $1.96 billion to administer. Since fiscal year 1980, the USFS has lost approximately $1.7 billion, or an average of $44 million per year.