Paper

Debbie Gaddis, Ph.D. Mississippi State Extension Service Dept. of Forestry

! When

! Involuntary

timber is • Destroyed • Stolen • Condemned

conversion ! A deductible loss

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! Did

trees die from . . . • Overcrowding? • Routine levels of insect infestation? • Routine disease? • Low rainfall (not abnormal drought)? ! These are normal losses and are not deductible.

!  Sudden-specific

date/event !  Unexpected and Unusual !  Natural or External forces !  Asset left unfit for use

Hurricane Katrina – August 29, 2005

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! Did

the timber die from

• Unusual and unexpected event such

! 

These may be noncasualty business losses.

as southern pine beetle or emerald ash borer outbreak? • Prolonged drought recognized as a disaster by President or Sec. of Ag.?

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! Just

a few trees— probably not worth the effort of determining loss ! FMV loss requires the estimation of loss in FMV for entire Single Identifiable Property

! Documentation

of the casualtypictures, news articles ! Documentation of the loss in fair market value ! Documentation of the basis in the timber

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! The

amount of the deductible loss is ! Loss in FMV ! Or Basis, ! Whichever is less

! Initial

basis set when acquired ! Adjusted to reflect

• T imber sold • T imber destroyed or stolen • Capitalized expenses

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! Timber

grew naturally after purchase or after clearcut ! Gifted property with no donor basis ! Inherited property where timber was clearcut and basis offset sale proceeds or unused on a timely return ! Forest established after acquisition and all costs deducted

• Retroactive establishment

possible • Unless " T imber already cut " Records not available

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! Farmer

Jones acquires a farm for $100,000 ! 50 acres in cropland ! 50 acres in timberland ! Total available for basis: $100,000

! Market

value for cropland is $1,700 per acre ! Market value for bare land is $100 per acre ! T imber value determined by...