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2013 FLM MARCH/APRIL [FREE] Landowner to Landowner p1
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                LANDOWNER TO LANDOWNER
 
                 YOUR ANSWERS TO TOUGH QUESTIONS

We recently asked our membership the following question via email: The Joint Committee on Taxation issues a list of tax expenditures each Congress listing all expenditures that cost the government money such as the home mortgage interest deduction. The 113th list has been issued and 3 key timber tax provisions are on the list.

The 3 main forestry expenditures are:
  1. Sale of timber treated as capital gains
  2. Forest management cost being deducted annually
  3. Reforestation cost can be deducted, limits apply, and not capitalized

What, if any, effect will this have on you as a private forest landowner and your management if the expenditures for forestry are not retained?

 

YOUR ANSWERS:
"My family has used the Federal tax code forestry provisions related to reforestation and management costs as well as capital gains over the years to help us maintain sustainability in our land and timber. We feel it is preferable to have a tax incentive in place that encourages sustainability as opposed to a subsidy program which over time tends to become an entitlement with reduced emphasis on sustainability. The investments we have made in our land and timber management were taxed when they were first earned. In addition, our land and timber investments are typically long term requiring years if not decades to mature. We are also exposed to a low degree of liquidity and to risk from fire, weather, and insects over which we have little control. Development pressure by other industries has reduced our ownership interests with limited compensation after many years of investment. Rates of return

harvest income into two years by scheduling the harvest close to the end of a year or have the timber buyer hold some of the payment until the beginning of the year following the harvest. Reforestation may also have to be scheduled for more than two years to take full advantage of the deduction. The bottom line is that any changes to these tax provisions would complicate the timing of timber harvests, forest management activities, and reforestation and definitely reduce the income from timber sales.”
Jon H. Gould , Birmingham, AL  

“Taxation on timber severely limits its viability as an investment. In Georgia we are subjected to federal capital gains tax, state capital gains tax and a local severance tax. This is in addition to annual property tax on the land used to grow timber. In many, if not most cases, this is marginal land with no other productive use. When all these taxes are added up over

may not be as good as other investment options. We pay the taxes and assume all the risk on our forestry investments. Family landownership typically carries with it a desire to leave the land in a better condition than it was when it was acquired. My husband and I have worked hard to impress this fact on our family’s next generation of landowners. We know our lands provide clean water and wildlife habitat that benefits society in general without us expecting a handout or payment for providing those services. Forestry tax provisions that encourage forest ownership and management will continue to encourage my family and others to practice sustainable management of land and timber. Without those provisions, sustainability efforts will likely decrease.”"
Ginny Nipper – Nipper Management ServicesAddis, LA

“I would definitely plan harvests, reforestation, and major management activities more closely. An attempt would be made to harvest in years that my other income was low, and I would try to split

 

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2013 Volume 72:


May/ June 2013

  
March/April 2013
 
Jan/Feb 2013
2012 Volume 71:

  
Nov/Dec 2012

  
Sept/Oct 2012

  
July/Aug 2012
 
May/June 2012
  
March/Apr 2012
2012 Volume 70:
 
Jan/Feb 2012
    

 

 

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