You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. See Reforestation Costs
in chapter 7. You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year.
The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. A partner, shareholder, or beneficiary cannot make that election.
A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc., of a partnership or S corporation. The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each.taxmap/pubs/p535-044.htm#en_us_publink1000209010
Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. They include costs for the following items.
- Site preparation.
- Seeds or seedlings.
- Depreciation on equipment used in planting and seeding.
Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. taxmap/pubs/p535-044.htm#en_us_publink1000209011
Qualified timber property is property that contains trees in significant commercial quantities. It can be a woodlot or other site that you own or lease. The property qualifies only if it meets all of the following requirements.
- It is located in the United States.
- It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products.
- It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation.
Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. taxmap/pubs/p535-044.htm#en_us_publink1000209012
The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. taxmap/pubs/p535-044.htm#en_us_publink1000209013
If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Any remainder interest in the property is ignored for amortization purposes. taxmap/pubs/p535-044.htm#en_us_publink1000209014
If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. See chapter 3 of Publication 544 for more information. taxmap/pubs/p535-044.htm#en_us_publink1000209015
To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information.
- A description of the costs and the dates you incurred them.
- A description of the type of timber being grown and the purpose for which it is grown.
Attach a separate statement for each property for which you amortize reforestation costs.
Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Attach Form 4562 and the statement to the amended return and write "Filed pursuant to section 301.9100-2" on Form 4562. File the amended return at the same address you filed the original return. taxmap/pubs/p535-044.htm#en_us_publink1000209016
You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Please provide your daytime telephone number (optional), in case we need to contact you. You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end.
Send the application to:
Internal Revenue Service
Associate Chief Counsel
Passthroughs and Special Industries
1111 Constitution Ave., N.W., IR-5300
Washington, DC 20224