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Page 1 of 4 Instructions for Form T (Timber) 15:15 - 18-JAN-2006

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Instructions for Form T Department of the Treasury


Internal Revenue Service

(Timber)
(Rev. December 2005)
Forest Activities Schedule
Section references are to the Internal Revenue Code unless otherwise noted.

purposes of making a subsequent sales every 3 or 4 years). However,


What’s New election. you must maintain adequate records
• If you are required to file Form T If you are required to file Form T, of these transactions and other
(see Who Must File below), you can you may revoke this election by timber-related activities during the
elect to deduct a limited amount of checking the “Yes” box in Part II, line year, as discussed in Recordkeeping,
qualifying reforestation costs (up to 18b. If you are not required to file below. These transactions may be
$10,000 per qualified timber property Form T, attach a statement to your treated as an investment for tax
per year) by entering an amount on return. purposes if your property is not held
Part IV, line 4a. For more information, • Outright sales of timber by for use in a trade or business.
see the instructions on page 3 and landowners will qualify for capital
If you are required to file Form
section 194. gains treatment after 2004. For more
Even if you are not required to file information, see the instructions for ! T for the current tax year (as
CAUTION discussed above under Who

Form T, you can elect to deduct on Part III.


Must File), complete all the parts of
your tax return up to $10,000 of the form that apply. However, if you
qualifying reforestation costs per year General Instructions are not required to file Form T but
for each qualifying timber property. have other forest-related activities
Attach a statement to your return for Purpose of Form (reportable in Part I (Acquisitions),
the year in which reforestation costs Part IV (Reforestation and Timber
Use Form T (Timber), Forest
were paid or incurred and provide the Stand Activities), or Part V (Land
Activities Schedule, to provide
following information. Ownership), complete and attach the
information on timber accounts when
1. The Unique Stand Identifier; appropriate tax form (for example,
a sale or deemed sale under sections
2. The total number of acres Form 4562 to claim depreciation) or
631(a), 631(b), or other exchange
reforested during the tax year; statement to your income tax return
has occurred during the tax year.
to report these activities. Also,
3. The nature of the reforestation
For additional information maintain adequate records as
treatments; and
regarding federal income tax rules for discussed in Recordkeeping, below.
4. The total amounts of the reporting forest-related activities, see
qualified reforestation expenses the following publications: Recordkeeping
eligible to be amortized under section • Pub. 225, Farmer’s Tax Guide,
194(a) or deducted under section • Pub. 535, Business Expenses, and Maps. Do not attach maps of your
194(b). • Pub. 544, Sales and Other timber properties to Form T to
• Certain timber producers who hold Dispositions of Assets. substantiate any claimed deduction
not more than 500 acres of qualified for depletion of timber. Instead, you
timber property located in the Gulf Who Must File are required to retain records
Opportunity Zone for Hurricane sufficient to substantiate your right to
Complete and attach Form T to your
Katrina, Rita, or Wilma are allowed an claim the deduction, including a map
income tax return only if you:
(where necessary) to show clearly the
increased reforestation expense • Claim a deduction for depletion of
deduction. For more information, see location(s) of timber and land
timber,
acquired, timber cut, and timber and
Pub. 4492, Information for Taxpayers • Elect under section 631(a) to treat
Affected by Hurricanes Katrina, Rita, land sold for as long as their contents
the cutting of timber as a sale or
and Wilma. may become material in the
exchange, or
• If you previously elected for any • Make an outright sale of timber administration of any Internal
tax year ending before October 23, Revenue law.
under section 631(b).
2004, to treat the cutting of timber as Other business records. You must
a sale or exchange under section Complete Form T in accordance
also keep business records to
with sections 194, 611, 631, and
631(a), you may revoke this election support other items reported on your
1231, and the related regulations.
without the consent of the IRS for any tax return such as expenses incurred
tax year ending after October 22, Exceptions. You are not required to during the tax year for road
2004. The prior election (and file Form T if you only have an construction and for building drainage
revocation) is disregarded for occasional sale of timber (one or two structures.
Cat. No. 39879B
Page 2 of 4 Instructions for Form T (Timber) 15:15 - 18-JAN-2006

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Note. Maintain separate cost What Is Included in Each and after the casualty event, not to
accounts for road construction and exceed the basis in the affected
drainage structures, such as ditches
Account block. Keep FMV appraisals in your
and canals. For example, for roads You must include your timber in one records to support the claimed loss
constructed for logging timber or to or more accounts. Generally, each (see Recordkeeping, earlier).
conduct management activities on fee account must include all your timber
land or land held under long-term that is located in one “block.” A block Line 18a
cutting contracts, maintain records may be: If you are making the 631(a) election,
showing the number of miles 1. An operational unit that or have made the election in a prior
constructed and how the total includes all timber that would logically tax year, check the “Yes” box on line
expenditures were either (a) go to a single point of manufacture, 18a.
capitalized, (b) amortized, or (c) 2. A logging unit that includes all Note. The 631(a) election cannot be
claimed as an ordinary expense. timber that would logically be made on an amended return.
Keep separate records for each removed by a single logging You must maintain the following
unique stand identifier, depletion development, or records.
account, block, tract, or geographic 3. An area established by the
Adjusted basis for depletion.
area tributary to a mill or mill geographical or political boundaries
Maintain records that show the
complex. Also, keep records that of logical management areas. Timber
adjusted basis for depletion, fair
verify the basis in property for as long acquired under a cutting contract may
market value (FMV), and gain or loss
as they are needed to figure the basis not be included in part of a block, but
for each sale or exchange of standing
of the original or replacement should be kept in a separate account.
timber for which you have a section
property. 631(a) election. The records must
For exceptional cases, the timber
in a given block may be divided into show the adjusted basis for depletion
two or more accounts. See and the FMV of the timber as of the
first day of the tax year in which
Specific Instructions Regulations section 1.611-3(d) for
timber was cut. The records must
more information.
show these amounts by species and
Part I. Acquisitions unit rates if these transactions are
Complete this part if you acquired
Part II. Timber Depletion reported on a species basis. The gain
timber, timber-cutting contracts, or Complete this part for each timber or loss on standing timber is reported
forest land during the tax year, account that has changed in quantity on Form 4797, Sales of Business
whether the acquisition was by or dollar amount. A timber account Property.
purchase, exchange, gift, or may change in quantity or dollar
Date of acquisition. The records
inheritance. amount as a result of acquisitions,
must provide the date of acquisition
dispositions, the cutting of timber,
of timber that was cut in the tax year,
How to Report Acquisitions capitalized expenditures, casualty or
if acquired after March 1, 1913; the
Report acquisitions during the tax theft losses, corrections, additions for
quantity of timber remaining (adjusted
year (whether taxable or not) of growth, and transfers from other
for growth, correction of estimates,
timber, timber-cutting contracts, or accounts. Use this part to figure
changes in use, and any change in
forest land. Report separately each depletion for timber cut or the basis
the log rule or other measure used);
acquisition of $10,000 or more. for timber sold or lost during the tax
and the adjusted basis at the
year. A depletion schedule is required
You may combine acquisitions of beginning of the tax year. The
to be maintained for all types of
less than $10,000 for each account records must state the acreage cut,
timber ownership.
and omit lines 2 and 3. For an the amount of timber cut from the
acquisition by gift or inheritance, skip Lines 1 through 6 applicable block during the tax year,
lines 4 through 7. and the log rule or other method used
Provide data for each timber account
to determine the quantity of timber
For an acquisition or lease of separately. Account for any changes
cut. If depletion accounts are kept by
timber-cutting rights on a pay-as-cut that have occurred during the tax
separate tracts or purchases, give the
basis, except for those under which year. Attach as many additional
information separately for each tract
all cutting is completed within the tax pages as needed. If you deplete on a
or timber purchase.
year, do not complete lines 4 through block basis, combine new purchases
8. Instead, list the provisions of the with the opening balances and use If an average depletion rate based
purchase or lease agreement, the average depletion rate shown on on the average value or cost of a
including the number of years from line 8, column (b), for all timber cut or timber block was used in earlier
the effective date to the expiration sold, regardless of how long held. years, the adjusted basis referred to
date, annual minimum cut or in section 631(a) is the average basis
payment, and the payment rates for Line 14, column (b) shown on line 8, column (b), after
different kinds of timber and forest The casualty loss limitation is adjustment.
products. Follow the format of lines 1 determined by the decrease in fair Characteristics of the timber. The
through 9 on additional sheets if market value (FMV) of the Single records must describe in detail the
necessary. Identifiable Property (block) before characteristics of the timber that
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Page 3 of 4 Instructions for Form T (Timber) 15:15 - 18-JAN-2006

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

affect its value, such as total quantity, disregarded for purposes of making a completed within the tax year. Follow
species, quality, quantity per acre, subsequent election. Unless this the format of lines 1 through 8 on
size of the average tree, logging special rule applies, or the election additional sheets if necessary.
conditions, and distance to markets. was made for a tax year beginning
Valuation evidence. The records before 1987, you can only revoke a Part IV. Reforestation
must provide evidence in the form of section 631(a) election with IRS
actual sales of comparable timber as consent. and Timber Stand
of the valuation date, along with other Activities
valuation evidence used. Include a Part III. Profit or Loss Summarize your expenditures for
computation showing the difference From Land and Timber reforestation and timber stand
between the cost (excluding timber or
activities during the tax year. Timber
stumpage cost) and value of the Sales stand activities include all silvicultural
primary wood product (logs or other Complete this part to report all prescriptions (such as burning,
roundwood, chips, etc.) at the mill or dispositions of timber, timber-cutting spraying, and thinning) applied to a
plant. Give detailed evidence that contracts, or forest land during the tax timber stand regardless of age.
permits a comparison with the timber year (whether taxable or not). Do not
on which you report a value. report dispositions by gift or Line 4a. Reforestation
Additional information. The records distributions made by an estate or to
Expenses
must include the following additional a beneficiary.
information: By entering an amount on this line,
Report each sale involving total you are indicating that you have
1. Location of the sawmill, log consideration of $10,000 or more. elected to deduct qualifying
market, or other point of delivery of You may combine sales of less than reforestation expenses that were paid
the logs or wood to the user or buyer. $10,000 for each timber or land or incurred after October 22, 2004, for
2. The total MBF, log scale, cords, account and omit lines 2 and 3 for each qualified timber property under
or other units of timber cut, and the each combined small sale. section 194(b). You must complete
length and diameter of the average line 1 of Part IV listing the following:
Outright sales of timber after
log or the average number of units
December 31, 2004. New rules • The account, block, tract, area or
per tree. stand identification number for each
under section 631(b) allow the
3. The percentage of rough qualified timber property (QTP);
landowner to treat outright sales of
lumber grades, by species,
timber after 2004 as capital gain. The • The kind of activity (burning,
manufactured from the timber during chopping, spraying, planting, seeding,
new rules extending capital gains
the year, or, if cut timber is sold as thinning, pruning, fertilizing, etc.);
treatment to outright sales of timber
logs, the percentage of log grades, by
are similar to certain disposals of • The number of acres treated; and
species.
timber under a contract with a • The total expenditures.
Timber owned or held under a retained economic interest. However,
The aggregate amount of
contract right to cut. Show the for outright sales, the date of disposal
reforestation expenses which can be
amount of timber owned, or held is not deemed to be the date timber is
claimed on line 4a for any tax year
under a contract right to cut, for a cut because the owner may elect to
cannot exceed $10,000 ($5,000 if
period of more than 1 year. Show treat the payment date as the date of
your filing status is married filing
separately the quantity of timber cut disposal. For more information, see
separately) for each qualified timber
that was held for less than 1 year. section 631(b) and Pub. 544.
property for any tax year. The
The scale of logs purchased during Timber-cutting contract. For a sale remaining costs (line 4b) can be
the year must be shown by species or lease of timber-cutting rights on a amortized over an 84-month period
and quantity and excluded from the pay-as-cut basis, that will be paid for using the half-year convention under
quantity shown as cut under section at intervals during the cutting period section 194(a). For more information
631(a) in Part II, line 17. Also show according to the number of units cut, on reforestation costs, see Pub. 535.
the number, cost, and point of complete lines 4, 7, and 8, only for
delivery of purchased logs by species accounts that must be reported on If you do not elect to deduct
and grade. your current year income tax return. reforestation expenses under section
194(b), all reforestation expenses will
Line 18b Instead of completing lines 5a, 5b, be capitalized in a deferred timber
and 6, briefly state the provisions of depletion account.
If you are revoking your 631(a) the sale or lease agreement,
election, check the “Yes” box. including the number of years from Reforestation expenses are direct
If you made a section 631(a) the effective date to the expiration costs incurred for reforestation by
election for any tax year ending date, annual minimum cut or planting or artificial or natural
before October 23, 2004, you can payment, and the payment rates for seeding. This includes costs for the
revoke that election without the the different kinds of timber and forest preparation of the site, of seeds or
consent of the IRS for any tax year products. You may combine small seedlings, and for labor and tools,
ending after October 22, 2004. The sales or leases of timber-cutting including depreciation of equipment
prior election (and revocation) is rights on a pay-as-cut basis that were such as tractors, trucks, tree planters,
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Page 4 of 4 Instructions for Form T (Timber) 15:15 - 18-JAN-2006

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

and similar machines used in planting complex. Report contract work You are required to give us the
or seeding. separately from your employees’ information. We need it to ensure that
Reimbursements under work. you are complying with these laws
governmental reforestation and to allow us to figure and collect
Planting or seeding. Report the
cost-sharing programs. If you have the right amount of tax. Section 6109
expenses you incurred during the tax
been reimbursed under any requires return preparers to provide
year for planting seedlings or sowing
governmental reforestation their identifying numbers on the
seed to reforest the land. Report this
cost-sharing program, you may not return.
information separately for each
claim these expenses unless the unique stand identifier, depletion
amount reimbursed has been You are not required to provide the
account, block, tract, or operating information requested on a form that
included in your income. area tributary to a mill or mill is subject to the Paperwork Reduction
Qualified timber property (QTP). complex. Report contract work Act unless the form displays a valid
Any qualified timber property subject separately from your employees’ OMB control number. Books or
to section 194(b) may not be work. records relating to a form or its
combined with any other qualified
Other silvicultural activities. instructions must be retained as long
timber property account (depletion
Report all expenditures that must be as their contents may become
block) for which depletion is allowed
capitalized and items that you elect to material in the administration of any
or for casualty losses (that is, lines 13
capitalize. Also, list on a separate Internal Revenue law. Generally, tax
and 14 of Part II) or other purposes.
attachment items that are treated as returns and return information are
The qualified timber property account
current deductions (including, but not confidential, as required by section
must be maintained until after the
limited to, weed control, pruning, 6103.
timber is disposed of through sale,
harvest, or other transaction. fertilization, thinning, insect and
disease control). Report this The time needed to complete and
For each qualified timber property information separately for each file this form will vary depending on
(QTP), keep detailed information to unique stand identifier, depletion individual circumstances. The
support reforestation costs, showing account, block, tract, or operating estimated burden for individual
treatments and dates of application. area tributary to a mill or mill taxpayers filing this form is approved
Each qualified timber property is complex. Report contract work under OMB control number
required to have a unique stand separately from your employees’ 1545-0074 and is included in the
identifier. Retain this information for work. estimates shown in the instructions
your records. Report expenses such for their individual income tax return.
as supplies, labor, overhead, For more information, see section The estimated burden for all other
transportation, tools, and depreciation 194 and Regulations section 1.194-3. taxpayers who file this form is shown
on equipment. below.
Site preparation. Report all Part V. Land Ownership Recordkeeping . . . . . . . . 34 hr., 12 min.
expenses incurred during the tax year Complete this part to show all Learning about the law or
for preparing the land for planting or changes in your land account, the form . . . . . . . . . . . . . 42 min.
seeding (including natural seeding). including sales or exchanges, during Preparing and sending the
Include expenses for clearing the the tax year. Attach as many form to the IRS . . . . . . . . . 1 hr., 17 min.
land of brush and culling trees by additional sheets as needed,
burning, disking, chopping, shearing following the format of lines 1 through If you have comments concerning
and piling, spraying with herbicides, 6. the accuracy of these time estimates
or other measures taken to aid or suggestions for making this form
successful site reforestation. Report simpler, we would be happy to hear
this information separately for each Paperwork Reduction Act Notice. from you. See the instructions for the
unique stand identifier, depletion We ask for the information on this tax return with which this form is filed.
account, block, tract, or operating form to carry out the Internal
area tributary to a mill or mill Revenue laws of the United States.

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