Sale of Timber

[Trnr395]

Have a client who recently bought 42 acres of land for $52,000 which equals about $1238 per acre. They had 6 acres of this cleared for a house lot and recieved $4,310.65 for the wood that was cut. I could figure a cost for the total 6 acres but this would include the land and the timber together which wouldn't be correct because they still own the land. How do I figure the cost basis in the sale of this timber, they never had a forester value the timber?

Thanks....

[zeke]

Since the 42a was recent,

IF you can honestly say that all 42a are of reasonably equal value, and that all 42a are comparably wooded, then I would suggest that timber from 6a be valued as sold and show no gain/loss. the rest of the values can be easily computed therefrom.

IF, however, the land &/or timber is not closely equal for each acre, you really need an appraisal.

[DANRVAN]

All you need to know is the volume of the timber cut and the timber market price on the date the property was purchased. Since this was a recent purchase, there is probably no growth factor to consider.