$400,000 sale of Christmas trees and stumpage

[WITAXLADY]

so a client who I helped sends someone to me who owes $80,000

 

sells Christmas trees and now owes $80,000

 

first he is listed as a Sch C business - isn't that a "Christmas Tree Farm" with some preferential treatment on capital gains?  - WI gives that to farms - Sch F

anything else? Preproductive costs somewhere?

 

he also has some stumpage.. - possible depletion? Timber sec 631

 

What about pre planning?

 

He had a nice gain on Stifel Nico - have to look that up - never heard of it! plus sale of Advanced - $156,000 gain - again never heard of that ???

 

plus social security , an IRA and rent of farmland income

 

$6,000 tax from form 8960 and no estimated taxes fed or state... 

 

who is looking for a challenge this close to the end so I can help this guy -

sincerely,

D

 

[kcjenkins]

Don't hold your breath, Dee.  

 

Section 611 provides an allowance of a deduction for depletion for oil and gas wells, mines, other natural deposits and timber. Treasury Regulation § 1.611-1 covers general provisions for depletion of all natural resources. Treasury Regulation § 1.611-3 provides rules applicable to timber. (Note: Treasury Regulation § 1.611-3(a) specifically identifies Christmas trees as falling under the provisions of Treasury Regulation § 1.611-3.)

 

From Pub 225:

 

Christmas tree cultivation.   If you are in the business of planting and cultivating Christmas trees to sell when they are more than 6 years old, capitalize expenses incurred for planting and stump culture and add them to the basis of the standing trees. Recover these expenses as part of your adjusted basis when you sell the standing trees or as depletion allowances when you cut the trees. For more information, see Timber Depletion under Depletion in chapter 7.

  You can deduct as business expenses the costs incurred for shearing and basal pruning of these trees. Expenses incurred for silvicultural practices, such as weeding or cleaning, and noncommercial thinning are also deductible as business expenses.

  Capitalize the cost of land improvements, such as road grading, ditching, and fire breaks, that have a useful life beyond the tax year. If the improvements do not have a determinable useful life, add their cost to the basis of the land. The cost is recovered when you sell or otherwise dispose of it. If the improvements have a determinable useful life, recover their cost through depreciation.

 

Capitalize the cost of equipment and other depreciable assets, such as culverts and fences, to the extent you do not use them in planting Christmas trees. Recover these costs through depreciation.

 

http://www.irs.gov/publications/p225/ch07.html#en_US_2014_publink1000218298

[DANRVAN]

I do not have any experience with Christmas Trees either.  Might be elgible for Schedule J farm income averaging.

[Gail in Virginia]

Did he have any wages paid?  He might qualify for DPAD also.