We sold some standing timber last year and were given a tax for from the forestry co. listing the sale as a real estate transaction proceed ( 1099-s). How do I file this on our tax form?
legal description was hardwood stumpage, so I called it a cap. gain
Form 1099-S payments of timber royalties made under a pay-as-cut contract usually are reportable as sales proceeds on Form 4797, Sales of Business Property, and would receive capital gain treatment. (IRC Sec. 631(b))
If your adjusted basis in the timber is greater than the sales proceeds then you have a capital loss. If your basis is less than the sales proceeds then you have a capital gain.
So you are to report the amount reported in box 2 of the 1099S on Form 4797 Part I box 2d. Report your basis in box 2f. Any gain is calculated and taken to Schedule D of your Form 1040.
I hope I have provided the clarity you were looking for, please let me know if you have any further questions.
Professional in capital gains and finance related questions