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levr, Tax Advisor
Category: Capital Gains and Losses
Satisfied Customers: 29776
Experience:  Working for a large tax preparation service
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We sold our timber property last May 5, 2015 after holding

Customer Question

We sold our timber property last May 5, 2015 after holding it for investment for 28 years. We sere not prepared for this sale but did sell early for several reasons - one of the main ones being that we had a purchaser prepared to pay on the spot. Now we cannot get all of our information together quickly enough to figure out how much we owe in taxes, if anything. We went to an accountant 3 months ago to help us but found that he did not know about such things as basis, depletion due to various things including losses due to storm, statute of limitations on deductions, if any. He was to have searched for some answers to these things and call us in or another visit to get the job done. He did not call back. We are now striving to pull every thing to get but we really need the help of a CPA who is knowledgeable about timber, logging, etc and all current things impacting amounts of tax, time limits on various deductions, as for depletion. We need an extention to not only find which of our numerous seemingly legitimate deductions are legitimate and whether those deductions are still valid; but also to find a reasonable estimate of the amount of tax that we owe, if any. We mean to do what ever it is that we need to do but we are simply not ready to do whatever that is.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  levr replied 1 year ago.
Timber rights are the ownership of the marketable trees on a particular property. Similarly - mineral rights ("mineral interest") - are the ownership of the marketable minerals that are extracted from the land.Both are parts of an estate in real property. The complete private ownership is known as a "fee simple estate". The property owner may sell or transfer partial rights known as "surface rights" and "subsurface rights".For tax purposes - partial rights to a real property are treated the same way as a fee simple estate - they may be sold, the seller will recognize a capital gain on the sale, and - yes - the beneficiary may get a stepped up basis in inherited timber and mineral rights.
Expert:  levr replied 1 year ago.
Inherited property is ALWAYS treated as a long term.Please see that very helpful publication - Forest Landowners Guide to the Federal Income Tax - capital gain = (selling price) - (basis).The basis of inherited property is a fair market value of that property at the time the decedent passed away. You need to determine that value to properly calculate the taxable gain or loss.You need to report the sale transaction on form 8949 - that is a new form starting 2011 - and then - you will transfer results to schedule D. Here is this form - appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.