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You just bought land – Now What?

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You looked for land for sale for a long time.  Spent a lot of time, energy, and money and finally purchased that perfect tract of land for you and your family.  What’s one of the first things you should do?  If the property has any timber you should establish your timber basis, providing you didn’t have it appraised before purchase.  The basis should be established by a Registered Forester.

Why? You’ll need it when you either sell your timber or suffer a casualty loss.  When/if you sell the timber, you can subtract the basis from the sale amount to determine your tax liability.  If you have no basis then you’ll owe on the entire amount.  Here’s the tough one…casualty loss.   Here’s a quote from Dr. Linda Wang, Taxation Specialist, USDA Forest Service.

“Deductible casualty loss for timber held for business or investment purpose is the smaller of the adjusted basis of timber and the difference of the fair market value immediately before and after the casualty.”  Click HERE for the full article.

In layman’s terms, if you suffer $50,000 in timber loss from a tornado but have no basis…then you cannot claim a loss.  Here in central Alabama, tornados are frequent.  I’ve lost count of the number of landowners that have called me after a tornado and after they salvaged the timber and asked me to calculate a timber basis.  It is extremely difficult to come in after the fact and calculate a timber basis that I would be comfortable signing my name to the report.  In reality these owners had no idea they needed a basis until they went to their accountant and found out.  If I’m contacted after someone had either purchased land or inherited, I can determine the basis even if it was years ago.  I cruise the timber then discount the growth, look up the timber values at that time and establish the basis.

When I’m at the closing table representing either the seller or buyer, I’ll always mention to the buyer that they need to establish their timber basis.  They’ll need it sooner or later.  If you need any help, give me a call, 205-837-4466.

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About The Author
Eddie Stone

Eddie Stone is an accomplished agent for Great Southern Land specializing in buying and selling land. An Alabama resident, Eddie has used his extensive knowledge to work and sell land in 15 counties surrounding the Birmingham Metro area. Eddie obtained a Master's Degree in Forest Business from Mississippi State University. For the next 20 years, he worked as a Registered Forester in the large corporate sector in both the procurement and land management arenas where he became an expert in land management, maximizing the biological growth of timber, determining the value of a timber tract, and maximizing its value for the landowner. In 1999, Eddie founded Forever Green, Inc.; a consultant forestry business that quickly became a leader in the local timber business. He went on to obtain a real estate license and join Great Southern Land as an Alabama land agent to further serve his clients' needs and provide full-scale, exceptional service. Eddie is also a Contractual Conservation Planner for the Georgia Alabama Land Trust. He prepares Conservation Easement Baseline Documentation Reports which includes technical writing, field inspections, GPS documentation, and GIS map preparation. Eddie's forestry expertise, coupled with being a REALTOR, has made him uniquely qualified to help clients navigate all aspects of buying and selling land.