Basis of Timber

[Christian]

In 2009 a mother who owned 200 acres of land with standing timber added her son's name on the deed to the property with a right of survivor ship. She died in 2010. The son sold the timber in 2015. The question is the basis of the timber he sold. My view he inherited it in 2010 and that he is entitled to use the stepped up basis. Any input will be appreciated.

 

[Lion EA]

You'll want to read the paperwork.  Your description suggests he received half by gift in 2009 at half his mother's basis at that time.  Then inherited the other half from his mother in 2010 at stepped up/down DOD value.

[TAXMAN]

You may also want to get a Timber Expert in there to try and establish a basis for the timber if you didn't sell the land on which it sits.

[Lion EA]

TimberTax.org

 

[schirallicpa]

usually land transfers do not differentiate timber from land purchased (transferred).  sometimes you will see someone purchase land for the specific purpose of timbering, and then they have a price allocated.  Most of the time, timber is not considered and just part of what you got.  And most of the time it doesn't make that big of a difference to the tax return because it is capital gain. 

I really get annoyed when someone takes the gravy, still owns the land that will produce trees again - and still tries to avoid paying a little tax on it.

 

 

[easytax]

Had a "timber" client (normal person, not in business, etc.) who in 2012 purchased land (second home/vacation) for 95K and in 2015 had a "timber" person purchase timber for $5,500. The purchaser supplied the basis of the timber in 2012 as $4,000.  Did the "sale" with cap gain of $1,500.    Am planning on reducing basis in property by $4,000 (timber value at purchase) to 91K.

Does this sound correct?   OR should property remain at 95K and the timber basis (4K) is already accounted for in the sale?

     Again, Thanks in advance.

[kcjenkins]

Yes, if he paid 95K for land and timber, and the timber at that point was worth 4K, then the 'Land' value, assuming no Real Estate included, would be 91K.  If there was R/E on the land, the 91K would be divided appropriately between them.  

 

[mcb39]

The trick is getting someone to put a value on the timber.  Almost always, client comes in after the fact with a 1099T which usually equals no basis.