Let’s talk taxes

[Badgers80]

@Badgers80, any thoughts on the timber tax stuff I posted up above?

I don’t have any prior knowledge of timber tax, but I looked it up now to try to help. All of what I’m seeing confirms your thinking: that you’d want a discounted cash flow analysis to show that the expected future harvest income compared to your annual expenses and harvest expenses would result in net income. That looks to be the golden ticket in the case of timber whereas it’s actual income or loss for purposes of the hobby loss rules for ag land. I’d be wary of not having an analysis in hand if I were going the timber route.

Timber is nice tax wise in that the growth of the timber stand is taxed at long term capital gains rates when held for at least a year - ag is ordinary rates. Then, there’s an ordinary income piece for additional profit when harvesting but that would be relatively much smaller it seems.

However, the income is when you harvest - likely all in one year for landowners. So, there’s a lot of income in the harvest year vs ag when it’s more spread out. Looks like you used to be able to spread out the income way back when but that’s changed. All of this is to not to say one is distinctly better than the other - if you have forest land, it’s not like you’re going to convert it to ag land for tax purposes or vice versa.

 

[Turkish]

I don’t have any prior knowledge of timber tax, but I looked it up now to try to help. All of what I’m seeing confirms your thinking: that you’d want a discounted cash flow analysis to show that the expected future harvest income compared to your annual expenses and harvest expenses would result in net income. That looks to be the golden ticket in the case of timber whereas it’s actual income or loss for purposes of the hobby loss rules for ag land. I’d be wary of not having an analysis in hand if I were going the timber route.

Timber is nice tax wise in that the growth of the timber stand is taxed at long term capital gains rates when held for at least a year - ag is ordinary rates. Then, there’s an ordinary income piece for additional profit when harvesting but that would be relatively much smaller it seems.

However, the income is when you harvest - likely all in one year for landowners. So, there’s a lot of income in the harvest year vs ag when it’s more spread out. Looks like you used to be able to spread out the income way back when but that’s changed. All of this is to not to say one is distinctly better than the other - if you have forest land, it’s not like you’re going to convert it to ag land for tax purposes or vice versa.

I am extremely appreciative of this feedback! If you ever need any chemical engineering help, let me know. ;)

This all emphasizes what I’ve felt like I need but am having trouble getting help with: a timber management plan. To my untrained mind, this will set a basis for assumed harvest volumes and dates to use as the positive cash flows in the cash flow analysis.

 

[bwoods11]

If you’re renting it out, no. You’re a passive participant.

If you farm it, yes, but see the discussion on the hobby loss rules.

You might not b able to write off a tractor , but if you have crop land income you can write off interest on loans, taxes, etc.. fencing, CRP mowing etc..

 

[Badgers80]

You might not b able to write off a tractor , but if you have crop land income you can write off my interest on loans, taxes, etc.. fencing, CRP mowing etc..

Yes, good add! Took the question for face value, but all of those are good to write off against the income.

 

[Badgers80]

I am extremely appreciative of this feedback! If you ever need any chemical engineering help, let me know. ;)

This all emphasizes what I’ve felt like I need but am having trouble getting help with: a timber management plan. To my untrained mind, this will set a basis for assumed harvest volumes and dates to use as the positive cash flows in the cash flow analysis.

No problem
Hope you get help with the plan. Timber would be a nice source of income if you have the goods.

 

[buckdeer1]

I know owners of rec land that can get ag tax rate from planting hardwoods because they have had history of timber harvest and I also know people that cut and sell fire wood and also get less tax,CRP also usually counts as ag

 

[T-Max]

I know owners of rec land that can get ag tax rate from planting hardwoods because they have had history of timber harvest and I also know people that cut and sell fire wood and also get less tax,CRP also usually counts as ag

KSA 79-1476

Sent from my iPhone using Tapatalk

 

[gjs4]

All due respect, I would look for another accountant, immediately.

H&R Block was always an extension of the IRS and wouldn't deduct jack skit for their customers. The last person I'd hire to be my CPA is a former IRS agent. There is so much gray area in tax law, hiring someone who sees in black and white isn't wise, IMO.

I have yet to find a good cpa.... theyre ghosts

 

[S.T.Fanatic]

I have yet to find a good cpa.... theyre ghosts

What you need to understand is a CPA is working for the irs not you. You can write off essentially everything if your corporate structure is set up properly. It is actually illegal for a cpa to give tax strategy advise and they can loose their licenses over it. I hired a tax law firm last year and am currently in the process of restructuring now. Haven’t gotten to far yet but on paper looks to be substantial tax savings. It was expensive and is taking longer than it should have due to being a small company with zero extra time in our busy season.

 

[bigboreblr]

Howboutthemdawgs,

Im not that familiar with your land. How many acres, how many acres tillable you want to use. A single parcel can be divide in acres. I hunt a 350 acre parcel and around 80-100 is non-rillable. Parcels can be split into tree farm / tillable / wetland or barren. There are thouands upon thousands of people who have land, who are not farmers, who use their property to rent to farmers. Relevant improvements to the farmland are justified. Some things may not. Just like a rental property. Fxing a roof or door ok, adding a hot tub or very expensive landscaping services, not ok. You also also building equity, thats your profit, if you are paying the bank for the land.

My brother in law does thousands of acres of ther peoples land. He does services, rents, and does the whole thing just so the owner calls his land farmland. Think he rents for a dollar or something like that.

Some farmers can take off the lease and plant rye after a harvest, or won't mind if you do it. You will need to spray before planting. Errosion control / weed control.

Farmers can also leave some standing crops for you too. My brother in law does that. He does ask they brush hog before planting time.

There's a guy out in western NY that does hay on his property. He does rye n medium red clover. My brother in laws friends do a wheat business in NY. Still makes great hunting land. They do soy beans, corn, and do rye / raddish no till winter plantings too. They don't eave the rye out long enough to harvest.

NY has a very active micro brewery industry, I know they sell their stuff at close to retail prices. They really like when they show up to the feed store.

What farmers are around for resources. You can also poke the local farmers co-op or ag services places for folks who would use your land.

The 80 acre parcel I hunt has a 15 acre parcel right next to he rents. That guy is a retired veternarian and a PIA, used to leave me nasty notes on my truck when I came to hunt. Puts up his own tresspassing signs on my brother in laws property. He has chilled out the past 3 or 4 years. He made him walk up to m and appologize. Always some drama up there..... Waiting for the amish farm next door for act 3.....

 

[gjs4]

What you need to understand is a CPA is working for the irs not you. You can write off essentially everything if your corporate structure is set up properly. It is actually illegal for a cpa to give tax strategy advise and they can loose their licenses over it. I hired a tax law firm last year and am currently in the process of restructuring now. Haven’t gotten to far yet but on paper looks to be substantial tax savings. It was expensive and is taking longer than it should have due to being a small company with zero extra time in our busy season.

I think my slow mind is finally where it need to be. A tax law atty will know more, and be able to contribute advise due to their role/"relationship" with the IRS whereas the CPA is bound by a business relationship and liable (essentially) both ways.

Our LLC has not been a money maker yet. As stated earlier in the thread; I have a couple of buddies who write off everything...like imported toilet paper after business luncheons :) . I am just trying to find out where I can be. I am going to start a thread thread on AirBnBs as we keep toying with the idea but I dont know what I can write off. Rabbit chase ending with the point of I want to be in the "fair" realm for an LLC that will eventually sell timber and the property itself, so i have no revenue coming in just yet....