What Are Your Trees Worth? T
COLUMBIA, MO.
his time of year Larry Godsey gets a lot of calls from woodland own- ers asking for advice about taxes
on timber they have sold. Godsey, an economist with the Cen-
ter for Agroforestry at the University of Missouri, usually starts by asking, “What is your basis?” A lot of woodland owners don’t know,
and that means they could be selling their timber for too little, and paying
too much in taxes. Put simply, the basis, also known as
the tax basis, is what you invested in an asset. “Basically, it’s what you paid for it or its fair market value on the day it was acquired,” Godsey said. While many woodland owners proba-
bly have the basis for their entire prop- erty – which might include cropland and buildings as well as forest – they may not have established what portion of the original purchase price went to
acquiring the timber. Timber is usually taxed as a
long-term capital gain, so you can subtract the cost basis when figuring your tax liabil- ity. But if you don’t have the basis, you have to pay tax on the full amount of the sale. Flooding and tornadoes took
A lot of woodland owners don’t know, and that means they could
be selling their timber for too little, and paying too much in taxes.
out a lot of trees in 2011, and you can declare those trees as a casualty loss – but again, only if you have a basis. It’s possible to establish a cost basis
retroactively by hiring a forester to cruise the timber and “ungrow” the trees, but that can be expensive. “When you acquire the property, hire
a consulting forester to estimate the volume and value of your timber,” God- sey said. You can adjust your basis to reflect additional investments – includ- ing the forester’s fee. If you have inherited the woodland,
and therefore didn’t pay anything at all to acquire your timber, you can still es- tablish a cost basis using the appraised market value of the timber, he said. Call before you cut “Never sell timber without assistance
from a consulting or professional forester,” Godsey said. “A lot of landowners may not know what their timber is worth. Don’t sell to the guy who knocks on your door and says, ‘I’ll give you $3,000 for your timber.’ “Call someone who knows about for-
est taxes and say, ‘I’m ready to do a timber sale. What do I need to know?’ That way, if you have to go back and establish a basis, you can do that be- fore the trees are cut and gone instead of looking at stumps and trying to esti- mate if they’re oak or walnut or what.”
For more information about timber
and taxes, Godsey recommends Inter- nal Revenue Service publication 225, Farmer’s Tax Guide, available at
www.irs.gov/publications/p225/. ∆
ASA Cheers Upcoming Implementation CONTINUED FROM PAGE 2 Soybeans and soybean products are
the largest U.S. export commodity, to- taling nearly 1.5 billion bushels in 2011, with a value of more than $22 billion. In that same year, South Korea imported $362 million worth of soy- beans and soy products from the United States, making it the eighth largest U.S. soybean export market. South Korea also purchased $1.2 bil- lion in meat products from the United
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States in 2011, making it a large and growing market for U.S. meat produc- ers.
ASA represents all U.S. soybean
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∆
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