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The Florida Forest Steward
A Quarterly Newsletter for Florida Landowners and Resource Professionals
Volume 9, No. 4
ITax Tips for.2002 .
INew Findings by Longleaf Alliance .. ..
Wildlife Plant Feature; greenbrjars (Smilax spp.)
ITimber Price Update
Mailing List Emergency We Still Need Your Help
Upcoming Events Florida Forestry Information Bulletin
A University of Florida Cooperative Extension Service and Florida Division of Forestry joint project:
Chris Demers (editor), School of Forest Resources & Conservation, UF, P.O. Box 110410, Gainesville, FL
32611-0410, (352) 846-2375 or cdemers(amail. ifas. uf edu
Alan Long (co-editor), School of Forest Resources & Conservation, UF, (352) 846-0891 or ajl2(ufl. edu
Todd Groh (co-editor), Florida Division ofForestry, 3125 Conner Blvd, Tallahassee, FL 32699-1650, (850)
414-9907 or groht(doacs. state, fl. us
Chuck McKelvy (co-editor), Florida Fish and Wildlife Conservation Commission, 3125 Conner Blvd,
Tallahassee, FL 32699-1650, (850) 414-9911 or mckelvc(,fwc.state.fl us
In3u1LLuLe o. Food andAgjrlculturai] Sc2e.ne
Tax Tips for 2002
Hard to believe it's already time to start thinking about tax time again, but here we are at the
beginning of 2003. The following is a summary of "Tax Tips for Forest Landowners for the 2002 Tax
Year" by Larry Bishop, Forest Taxation Specialist with the U.S. Forest Service. This is intended to
inform you of some of the things to keep in mind when preparing your Federal income tax return for
the 2002 tax year, particularly if you incurred any costs, revenues or cost-share payments associated
with timberland management. This is by no means exhaustive and we strongly recommend consulting
other sources for a more comprehensive treatment of this topic. Some useful on-line resources are
provided at the end.
Your Basis and Tax Records
Part of the price you receive from a timber sale is taxable income and part is your investment, or
basis, in the timber sold. The original cost of purchased timberland, or the value of inherited land,
should be allocated with land, timber, and other capital accounts. Then, adjust the basis in each of the
accounts up for new purchases or investments and down for sales or disposals. Keep good records,
including a written management plan, map, and documents supporting current deductions six years
beyond the date the return is due. The basis and timber depletion should be reported on IRS Form T
(timber), Schedule B.
Passive Loss Rules
Under passive loss rules you can be classified in 1 of 3 categories: (1) investor, (2) passive participant
in a trade or business, or (3) active participant (materially participating) in a trade or business. You
are materially participating if your involvement is regular, continuous, and substantial. Generally,
active participants get the best tax treatment of deductible expenses, but you must show this with
thorough records. Keep records of all business transactions related to managing your timber stands
and other business activities such as landowner meetings. Odometer readings to and from meetings,
canceled checks for registration fees, and copies of meeting agendas are some examples of
documentation of meeting attendance.
If you are an active participant in a timber business you must dispose of your timber under the
provisions of Section 631 to qualify for capital gains. This means that timber must be sold on a pay-
as-cut or "cut and convert" basis rather than lump sum. If you have considerable passive income,
such as Conservation Reserve Program annual payments, it may be to your advantage to be
considered a passive participant.
Reforestation Tax Credit and Amortization
The reforestation tax credit and 7-year amortization is among the best tax advantages for forest
landowners. If you reforested during 2002 you can claim a 10% investment tax credit for the first
$10,000 spent for reforestation. You can also deduct (amortize) all of your 2002 reforestation costs,
up to $10,000.00, minus half the tax credit taken, over the next 8 tax years. You can amortize
reforestation expenses on Form 4562, but the election to amortize must be made on a timely tax
return for the year in which the reforestation expenses were incurred. Passive owners may not be
eligible for this credit and amortization.
Caution: the credit and 7-year amortization are subject to recapture if you dispose of your trees within
5 years of planting for the credit; and within 10 years of planting for the amortization.
Capital gains and Self-employment Taxes
You could pay significantly more in taxes if you report timber sale income as ordinary income rather
than as a capital gain. Also, capital gains are not subject to the self-employment tax, as is ordinary
income. The net self-employment tax rate for 2002 is 15.3% for self-employed income of $400.00 or
All or part of the cost-share payments received in 2002 under any of the Federal or State cost-share
programs must be reported. Here are the options:
1 Include the payments as income and then recover the part that you pay plus the cost-share
payment through the amortization and reforestation tax credit described above.
2 Exclude the excludablee portion" from income if certain conditions are met:
a the cost-share program has to be approved for exclusion by the IRS and
b the maximum amount excludable per acre is the greater of the present value of $2.50 per acre or
the present value of 10% of the average income per acre for the past 3 tax years.
Cost-share programs approved for exclusion by the IRS are the Forestry Incentives Program, Forest
Stewardship Incentive Program, Wetlands Reserve Program, the Environmental Quality Incentive
Program, and the Wildlife Habitat Incentive Program. If you decide to exclude, you must attach a
statement to your return that states specifically what cost-share payments you received, that you
choose to exclude some or all of them, and how you determined the excludable amount.
Conservation Reserve Program (CRP)
If you planted trees during 2002 under CRP you must report your annual payment as ordinary
income. All other CRP cost-share assistance must also be reported as ordinary income, but payments
used to establish trees can be claimed as part of the reforestation expenses reported for the
reforestation tax credit/7-year amortization.
A casualty loss must result from an event that is identifiable, damaging to the property, and sudden or
unexpected or unusual in nature (e.g., wildfires and storms). Your claim for casualty losses cannot
exceed the adjusted basis minus any insurance or other compensation. Note that the IRS has ruled
that losses resulting from drought or beetles generally do not qualify for a casualty loss deduction
because they are not sudden, but they may qualify for a business- or investment- loss deduction.
Management and Maintenance Expenses
Your annual expenses for the management of an existing timber stand can be itemized during the tax
year they are incurred, although the amounts that can be deducted depend on your tax category
(investor, active, passive). If it is not to your advantage to itemize deductions for 2002 you should
capitalize these expenses.
Proper tax planning is a tedious but important part of timberland management. We strongly
recommend contacting a professional tax advisor to help you with this task if you are uncertain of the
Timber Tax Resources on the Internet:
"The Forest Landowners Guide to the Federal Income Tax" (Ag. Handbook No. 718) provides a
thorough overview of timber taxes. You can access this, "Tax Tips for Forest Landowners for the
2002 Year", and other publications on-line at the bottom of the Southern Region Forestry Extension
page at www.soforext.net/
See the National Timber Tax Web Site for a comprehensive treatment of timber taxes at www.
IRS publications and forms are available at www.irs.gov.
New Findings by Longleaf Alliance
By Mark J. Hainds. Research Coordinatoi. The Lonileaf Alliance. A.burn University Solon Dixon
Folesgtrl Education Center; Andalusia, Alabama
Production of container-grown longleaf seedlings has almost doubled since 1996 (data collected by
the Longleaf Alliance). As container production increased across the Southeast, planting guidelines
for container-grown longleaf appear to have been adapted from bareroot longleaf planting
guidelines. Many tree planters, experienced in planting bareroot loblolly and slash pine, believe that
"deeper is better" regardless of the pine species being planted. Planting guidelines for longleaf
typically emphasize a narrow planting window with a major concern with "shallow planting" that
will expose the plug. The prevailing theory is that an exposed plug will act as a "wick", drying out
the plug and increasing the chances of seedling mortality. Furthermore, most guidelines allow for the
terminal bud to be covered with soil at the time of planting, assuming that erosion will uncover the
bud and allow unrestricted growth. Consequently, these planting guidelines tend to encourage "deep
To test the validity of these long-accepted guidelines, The Longleaf Alliance installed four separate
planting depth studies with container-grown longleaf pine seedlings in 1998, 2000, and 2002. The
findings of these studies are summarized in the tables below. The silvopasture and Godwin sites are
well-drained upland soils, the orchard site has moderately-drained soils, and the Monroeville
Experimental Field site is poorly drained and wet. Very shallow planting depths were tested at the
Monroeville site, the most shallow testing with half of the plug out of the soil.
Terminal Bud % Survival % Survival
Depth at Planting i s Godwin site Orchard site
1.2" beneath soil 4
.4" beneath soil 9 86
exposed 89 60 80
.8" above soil 84 70
Terminal Bud Depth
1.2" above soil surface 74
2.4" above soil surface 79
Results from these studies indicate that, on some sites, deep planting may reduce seedling survival
and growth. Results also indicate that containerized longleaf seedlings may be more tolerant of
shallow planting than previously thought, thus possibly discrediting the "wick" theory. Surprisingly,
plugs only half-planted at the Monroeville site showed the best survival there. Guidelines for other
states may be adjusted but further studies are required before "shallow planting" is universally
For more information about these planting depth studies, contact Mark J. Hainds at 334-427-1029,
Wildlife Plant Feature, greenbriars (Smilax spp.)
Armed with thorns and rich with succulent shoots, smilax vines are important wildlife plants across
their broad range. About fourteen species are native to the southeastern U.S. and most are important
food plants for a variety of animals.
Form: Climbing or
scrambling woody vine,
6 60 ft long, usually
with thorns, grow from
underground runners and
deciduous or evergreen,
usually with 3 main veins
and netted interveins.
Flowers: Small, trumpet-
shaped flowers in small
yellowish or brownish;
with male and female flowers on separate plants (dioecious).
Fruit: berry, green turning blue or black, containing 1-3 seeds.
Wildlife value: The fruits of greenbriars are consumed by ruffed grouse, wild turkey, northern
bobwhite quail, and more than 40 species of songbirds. The foliage and young shoots are an
important food source for white-tailed deer, ruffed grouse, swamp rabbits, marsh rabbits, eastern
cottontails. Beavers enjoy the underground tubers.
Miller, J.H. and K.V. Miller. 1999. Forest Plants of the Southeast and their Wildlife Uses. Southern
Weed Science Society. Champaign, Ill. 454 pp.
For more information on wildlife food plants see the reference above or the University of Florida's 4-
H Companion Plant page at www.sfrc.ufl.edu/4h/Trees Plants/Plants/plants.html
Timber Price Update:
This information is useful for observing
trends over time, but does not necessarily
reflect current conditions at a particular '-
location. Landowners considering a timber
sale would be wise to let a consulting
forester help them obtain the best current
Stumpage price ranges reported across
Florida in the 4th quarter 2002 Timber ( j
Mart-South (TMS) report were $17-$25/
cord ($6-$9/ton) for pine pulpwood, $53- .
$82/cord ($20-$30/ton) for pine C-N-S,
$71-$105/cord ($27-$39/ton) for pine sawtimber, and $105-$138/cord ($39-$52/ton) for pine
plylogs. On average, prices were up for all products from 3rd quarter 2002 prices. Hardwood
pulpwood prices ranged from $10-$22/cord ($3-$8/ton), which was up slightly from those of the
previous quarter. A more complete summary of 4th quarter 2002 stumpage prices is available at your
County Extension office.
South-wide average prices increased for all the major timber products last quarter, which is
reportedly due to wet weather across the region. On average across the south, sawtimber prices
increased to a 2-year high. Pine chip-n-saw recovered from last quarter but remains down from
prices a year ago. The increase in pine pulpwood stumpage prices reflected wood shortages at the
major pulp mills, many of which chose to shut-down instead of paying higher prices for pulpwood.
Click on the link to see the graph use the "Back" function to return here.
Stewardship, Mailing List Emergency -We Still -Need Your Help
We're still looking for updated addresses. U.S. Post Offices in some parts of the state are no longer
delivering to route-box addresses (example: RR 1 Box 234). They will only deliver to 911
addresses: a house number followed by a road, street, drive, lane, circle, place, etc. (example: 123
Hound Dog Rd). PO Box addresses are good too. If you currently have a route-box address and
know your 911 address, please take a moment to send your 911 address to Chris Demers at
University of Florida, PO Box 110410, Gainesville, FL 32611; or cdemers(~ mail.ifas.ufl.edu. If you
don't know your 911 address, ask your local post office. If your 911 address is not yet available,
simply send it to us when it is. Thanks very much in advance for your help!