2. GOALS OF THE JMF TIMBER
PRACTICE GROUP
As a reputable accounting firm in West Alabama for
over 90 years, JamisonMoneyFarmer PC has vast
experience working with clients in the timber
industry. We have made it our priority to assist our
clients in understanding the complicated tax laws
surrounding timber.
3. Understanding these laws
is essential to optimizing
our client’s tax situation.
We work with timber
mills, timber managers,
timber farmers and
clients that hold timber
for investment to make
sure they are maximizing
their deductions and
classifying their timber
income correctly.
4. JMF offers tax planning, education seminars,
consulting and various other services related
to timber management and timber
investments. Our experienced timber experts
can keep you up to date on all timber-related
law changes and make sure that you are
optimizing your tax situation.
5. In light of the widespread
storm damage from the
recent Alabama Tornados,
forest owners need to be
aware of the tax rules related
to deducting losses from
storm damage and deferring
taxable income that may have
arisen from salvaged timber
proceeds.
What do you need to
minimize the effect of taxes
after the loss of timber?
6. What do you need to claim a timber casualty
loss?
1. A FORESTER to measure and
document the decline in value of
your timber
2. BASIS in the timber
3. Proof of OWNERSHIP
4. PHOTOGRAPHS of the damage
5. Proof of ATTEMPT to SALVAGE
the damaged timber
6. A CPA to assist you with
calculating the loss
7. Things to remember
• If you have NO basis (cost) in the
timber you will have NO tax losses to
deduct
8. Things to remember
• Timber casualty losses are limited to the lesser
of;
– Decline in fair market value, or
– Timber Basis
• You can use the entire basis in a “single
identifiable property” (SIP) to claim a loss up
to the value of the loss. A SIP is the depletion
block of timber – which varies by owner.
9. To Claim the Loss
• You may claim 2011 storm damage losses in the Presidentially
Declared Disaster Areas on your 2010 tax return if you elect to
do so.
• Timber losses may be a business casualty loss which yields
better tax benefits than a personal casualty loss.
10. TREATMENT OF GAINS
SALVAGE OR INSURANCE PROCEEDS IN EXCESS OF BASIS WILL
RESULT IN A GAIN.
1. Reinvest the Gain
2. Recognize the Gain
11. Reinvest the Gain
• The gain can likely be deferred if you plan to
reinvest the proceeds.
• If the damaged timber was in a Presidentially
Declared Disaster Area, you can reinvest the
proceeds in a broad range of business or
investment property.
• It does not have to be timber to defer the gain.
12. Recognize the Gain
• It may be better to go ahead and pay the tax on
capital gains.
• You can pay tax at a lesser rate on Long-Term Capital
Gains
• Be able to deduct reforestation expenses at higher
ordinary income rates.
13. The JMF Timber Practice Group is
available to assist you with your timber
tax issues as well as your Estate
Planning needs.
• Check us out at www.jmf.com and look for the
Timber Industry page.
• Contact us at 205-345-8440
