T (TIMBER) Instructions for Form T (TIMBER)

Instructions for Form T
(Timber)

Department of the Treasury
Internal Revenue Service

(Rev. December 2013)
Forest Activities Schedule
Section references are to the Internal
Revenue Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Form T
(Timber) and its separate instructions,
such as legislation enacted after it is
published, go to www.irs.gov/timber.

General Instructions
Purpose of Form

Use Form T (Timber), Forest Activities
Schedule, to provide information on
timber accounts when a sale or
deemed sale under sections 631(a),
631(b), or other exchange has
occurred during the tax year.
For additional information
regarding federal income tax rules for
reporting forest-related activities, see
the following publications:
Pub. 225, Farmer’s Tax Guide,
Pub. 535, Business Expenses, and
Pub. 544, Sales and Other
Dispositions of Assets.

Who Must File

Complete and attach Form T to your
income tax return only if you:
Claim a deduction for depletion of
timber,
Elect under section 631(a) to treat
the cutting of timber as a sale or
exchange, or
Make an outright sale of timber
under section 631(b).
Complete Form T in accordance
with sections 194, 611, 631, and
1231, and the related regulations.
Exceptions. You are not required to
file Form T if you only have an
occasional sale of timber (one or two
sales every 3 or 4 years). However,
you must maintain adequate records
of these transactions and other
timber-related activities during the
year, as discussed in Recordkeeping,
below. These transactions may be
treated as an investment for tax
purposes if your property is not held
for use in a trade or business.
Jun 20, 2013

If you are required to file
Form T for the current tax
CAUTION
year (as discussed above
under Who Must File), complete all
the parts of the form that apply.
However, if you are not required to file
Form T but have other forest-related
activities (reportable in Part I
(Acquisitions), Part IV (Reforestation
and Timber Stand Activities), or Part V
(Land Ownership), complete and
attach the appropriate tax form (for
example, Form 4562 to claim
depreciation) or statement to your
income tax return to report these
activities. Also, maintain adequate
records as discussed in
Recordkeeping, below.

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Recordkeeping
Maps. Do not attach maps of your
timber properties to Form T to
substantiate any claimed deduction
for depletion of timber. Instead, you
are required to retain records
sufficient to substantiate your right to
claim the deduction, including a map
(where necessary) to show clearly the
location(s) of timber and land
acquired, timber cut, and timber and
land sold for as long as their contents
may become material in the
administration of any Internal
Revenue law.
Other business records. You must
also keep business records to support
other items reported on your tax return
such as expenses incurred during the
tax year for road construction and for
building drainage structures.
Note. Maintain separate cost
accounts for road construction and
drainage structures, such as ditches
and canals. For example, for roads
constructed for logging timber or to
conduct management activities on fee
land or land held under long-term
cutting contracts, maintain records
showing the number of miles
constructed and how the total
expenditures were either (a)

Cat. No. 39879B

capitalized, (b) amortized, or (c)
claimed as an ordinary expense.
Keep separate records for each
unique stand identifier, depletion
account, block, tract, or geographic
area tributary to a mill or mill complex.
Also, keep records that verify the
basis in property for as long as they
are needed to figure the basis of the
original or replacement property.

Specific Instructions
Part I. Acquisitions

Complete this part if you acquired
timber, timber-cutting contracts, or
forest land during the tax year,
whether the acquisition was by
purchase, exchange, gift, or
inheritance.

How to Report Acquisitions

Report acquisitions during the tax
year (whether taxable or not) of
timber, timber-cutting contracts, or
forest land. Report separately each
acquisition of $10,000 or more.
You may combine acquisitions of
less than $10,000 for each account
and omit lines 2 and 3. For an
acquisition by gift or inheritance, skip
lines 4 through 7.
For an acquisition or lease of
timber-cutting rights on a pay-as-cut
basis, except for those under which all
cutting is completed within the tax
year, do not complete lines 4 through
8. Instead, list the provisions of the
purchase or lease agreement,
including the number of years from
the effective date to the expiration
date, annual minimum cut or payment,
and the payment rates for different
kinds of timber and forest products.
Follow the format of lines 1 through 9
on additional sheets if necessary.

What Is Included in Each
Account

You must include your timber in one
or more accounts. Generally, each
account must include all your timber

that is located in one “block.” A block
may be:
1. An operational unit that includes
all timber that would logically go to a
single point of manufacture,
2. A logging unit that includes all
timber that would logically be
removed by a single logging
development, or
3. An area established by the
geographical or political boundaries of
logical management areas. Timber
acquired under a cutting contract may
not be included in part of a block, but
should be kept in a separate account.
For exceptional cases, the timber in
a given block may be divided into two
or more accounts. See Regulations
section 1.611-3(d) for more
information.

Part II. Timber Depletion

Complete this part for each timber
account that has changed in quantity
or dollar amount. A timber account
may change in quantity or dollar
amount as a result of acquisitions,
dispositions, the cutting of timber,
capitalized expenditures, casualty or
theft losses, corrections, additions for
growth, and transfers from other
accounts. Use this part to figure
depletion for timber cut or the basis
for timber sold or lost during the tax
year. A depletion schedule is required
to be maintained for all types of timber
ownership.

Lines 1 through 6

Provide data for each timber account
separately. Account for any changes
that have occurred during the tax
year. Attach as many additional pages
as needed. If you deplete on a block
basis, combine new purchases with
the opening balances and use the
average depletion rate shown on
line 8, column (b), for all timber cut or
sold, regardless of how long held.

Line 14, column (b)

The casualty loss limitation is
determined by the decrease in fair
market value (FMV) of the Single
Identifiable Property (block) before
and after the casualty event, not to
exceed the basis in the affected block.
Keep FMV appraisals in your records
to support the claimed loss (see
Recordkeeping, earlier).

Line 18a

If you are making the 631(a) election,
or have made the election in a prior
tax year, check the “Yes” box on
line 18a.
Note. The 631(a) election cannot be
made on an amended return.
You must maintain the following
records.
Adjusted basis for depletion.
Maintain records that show the
adjusted basis for depletion, fair
market value (FMV), and gain or loss
for each sale or exchange of standing
timber for which you have a section
631(a) election. The records must
show the adjusted basis for depletion
and the FMV of the timber as of the
first day of the tax year in which timber
was cut. The records must show
these amounts by species and unit
rates if these transactions are
reported on a species basis. The gain
or loss on standing timber is reported
on Form 4797, Sales of Business
Property.
Date of acquisition. The records
must provide the date of acquisition of
timber that was cut in the tax year, if
acquired after March 1, 1913; the
quantity of timber remaining (adjusted
for growth, correction of estimates,
changes in use, and any change in
the log rule or other measure used);
and the adjusted basis at the
beginning of the tax year. The records
must state the acreage cut, the
amount of timber cut from the
applicable block during the tax year,
and the log rule or other method used
to determine the quantity of timber
cut. If depletion accounts are kept by
separate tracts or purchases, give the
information separately for each tract
or timber purchase.
If an average depletion rate based
on the average value or cost of a
timber block was used in earlier years,
the adjusted basis referred to in
section 631(a) is the average basis
shown on line 8, column (b), after
adjustment.
Characteristics of the timber. The
records must describe in detail the
characteristics of the timber that affect
its value, such as total quantity,
species, quality, quantity per acre,
size of the average tree, logging
conditions, and distance to markets.

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Valuation evidence. The records
must provide evidence in the form of
actual sales of comparable timber as
of the valuation date, along with other
valuation evidence used. Include a
computation showing the difference
between the cost (excluding timber or
stumpage cost) and value of the
primary wood product (logs or other
roundwood, chips, etc.) at the mill or
plant. Give detailed evidence that
permits a comparison with the timber
on which you report a value.
Additional information. The records
must include the following additional
information:
1. Location of the sawmill, log
market, or other point of delivery of
the logs or wood to the user or buyer.
2. The total MBF, log scale, cords,
or other units of timber cut, and the
length and diameter of the average
log or the average number of units per
tree.
3. The percentage of rough
lumber grades, by species,
manufactured from the timber during
the year, or, if cut timber is sold as
logs, the percentage of log grades, by
species.
Timber owned or held under a con­
tract right to cut. Show the amount
of timber owned, or held under a
contract right to cut, for a period of
more than 1 year. Show separately
the quantity of timber cut that was
held for less than 1 year. The scale of
logs purchased during the year must
be shown by species and quantity and
excluded from the quantity shown as
cut under section 631(a) in Part II,
line 17. Also show the number, cost,
and point of delivery of purchased
logs by species and grade.

Line 18b

If you are revoking your 631(a)
election, check the “Yes” box.
If you made a section 631(a)
election for any tax year ending before
October 23, 2004, you can revoke that
election without the consent of the
IRS for any tax year ending after
October 22, 2004. The prior election
(and revocation) is disregarded for
purposes of making a subsequent
election. Unless this special rule
applies, or the election was made for
a tax year beginning before 1987, you
can only revoke a section 631(a)
election with IRS consent.

Part III. Profit or Loss From
Land and Timber Sales

spraying, and thinning) applied to a
timber stand regardless of age.

Report each sale involving total
consideration of $10,000 or more.
You may combine sales of less than
$10,000 for each timber or land
account and omit lines 2 and 3 for
each combined small sale.

By entering an amount on this line,
you are indicating that you have
elected to deduct qualifying
reforestation expenses that were paid
or incurred after October 22, 2004, for
each qualified timber property under
section 194(b). You must complete
line 1 of Part IV listing the following:
The account, block, tract, area or
stand identification number for each
qualified timber property (QTP);
The kind of activity (burning,
chopping, spraying, planting, seeding,
thinning, pruning, fertilizing, etc.);
The number of acres treated; and
The total expenditures.

Complete this part to report all
dispositions of timber, timber-cutting
contracts, or forest land during the tax
year (whether taxable or not). Do not
report dispositions by gift or
distributions made by an estate or to a
beneficiary.

Outright sales of timber. Certain
rules under section 631(b) allow the
landowner to treat outright sales of
timber as capital gain. The rules
extending capital gains treatment to
outright sales of timber are similar to
certain disposals of timber under a
contract with a retained economic
interest. However, for outright sales,
the date of disposal is not deemed to
be the date timber is cut because the
owner may elect to treat the payment
date as the date of disposal. For more
information, see section 631(b) and
Pub. 544.
Timber­cutting contract. For a sale
or lease of timber-cutting rights on a
pay-as-cut basis, that will be paid for
at intervals during the cutting period
according to the number of units cut,
complete lines 4, 7, and 8, only for
accounts that must be reported on
your current year income tax return.
Instead of completing lines 5a, 5b,
and 6, briefly state the provisions of
the sale or lease agreement, including
the number of years from the effective
date to the expiration date, annual
minimum cut or payment, and the
payment rates for the different kinds
of timber and forest products. You
may combine small sales or leases of
timber-cutting rights on a pay-as-cut
basis that were completed within the
tax year. Follow the format of lines 1
through 8 on additional sheets if
necessary.

Part IV. Reforestation and
Timber Stand Activities

Summarize your expenditures for
reforestation and timber stand
activities during the tax year. Timber
stand activities include all silvicultural
prescriptions (such as burning,

Line 4a. Reforestation
Expenses

The aggregate amount of
reforestation expenses which can be
claimed on line 4a for any tax year
cannot exceed $10,000 ($5,000 if
your filing status is married filing
separately) for each qualified timber
property for any tax year. The
remaining costs (line 4b) can be
amortized over an 84-month period
using the half-year convention under
section 194(a). For more information
on reforestation costs, see Pub. 535.
If you do not elect to deduct
reforestation expenses under section
194(b), all reforestation expenses will
be capitalized in a deferred timber
depletion account.
Reforestation expenses are direct
costs incurred for reforestation by
planting or artificial or natural seeding.
This includes costs for the preparation
of the site, of seeds or seedlings, and
for labor and tools, including
depreciation of equipment such as
tractors, trucks, tree planters, and
similar machines used in planting or
seeding.
Reimbursements under govern­
mental reforestation cost­sharing
programs. If you have been
reimbursed under any governmental
reforestation cost-sharing program,
you may not claim these expenses
unless the amount reimbursed has
been included in your income.
Qualified timber property (QTP).
Any qualified timber property subject
to section 194(b) may not be
combined with any other qualified
timber property account (depletion
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block) for which depletion is allowed
or for casualty losses (that is, lines 13
and 14 of Part II) or other purposes.
The qualified timber property account
must be maintained until after the
timber is disposed of through sale,
harvest, or other transaction.
For each qualified timber property
(QTP), keep detailed information to
support reforestation costs, showing
treatments and dates of application.
Each qualified timber property is
required to have a unique stand
identifier. Retain this information for
your records. Report expenses such
as supplies, labor, overhead,
transportation, tools, and depreciation
on equipment.
Site preparation. Report all
expenses incurred during the tax year
for preparing the land for planting or
seeding (including natural seeding).
Include expenses for clearing the land
of brush and culling trees by burning,
disking, chopping, shearing and
piling, spraying with herbicides, or
other measures taken to aid
successful site reforestation. Report
this information separately for each
unique stand identifier, depletion
account, block, tract, or operating
area tributary to a mill or mill complex.
Report contract work separately from
your employees' work.
Planting or seeding. Report the
expenses you incurred during the tax
year for planting seedlings or sowing
seed to reforest the land. Report this
information separately for each
unique stand identifier, depletion
account, block, tract, or operating
area tributary to a mill or mill complex.
Report contract work separately from
your employees' work.
Other silvicultural activities.
Report all expenditures that must be
capitalized and items that you elect to
capitalize. Also, list on a separate
attachment items that are treated as
current deductions (including, but not
limited to, weed control, pruning,
fertilization, thinning, insect and
disease control). Report this
information separately for each
unique stand identifier, depletion
account, block, tract, or operating
area tributary to a mill or mill complex.
Report contract work separately from
your employees' work.
For more information, see section
194 and Regulations section 1.194-3.

Part V. Land Ownership

Complete this part to show all
changes in your land account,
including sales or exchanges, during
the tax year. Attach as many
additional sheets as needed, following
the format of lines 1 through 6.
Paperwork Reduction Act Notice.
We ask for the information on this
form to carry out the Internal Revenue
laws of the United States. You are
required to give us the information.
We need it to ensure that you are
complying with these laws and to
allow us to figure and collect the right
amount of tax.
You are not required to provide the
information requested on a form that

is subject to the Paperwork Reduction
Act unless the form displays a valid
OMB control number. Books or
records relating to a form or its
instructions must be retained as long
as their contents may become
material in the administration of any
Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section
6103.
The time needed to complete and
file this form will vary depending on
individual circumstances. The
estimated burden for individual
taxpayers filing this form is approved
under OMB control number
1545-0074 and is included in the
estimates shown in the instructions for

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their individual income tax return. The
estimated burden for all other
taxpayers who file this form is shown
below.
Recordkeeping . . . . . . . . 34 hr., 12 min.
Learning about the law or
the form . . . . . . . . . . . . .
42 min.
Preparing and sending
the form to the IRS . . . . . 1 hr., 17 min.

If you have comments concerning
the accuracy of these time estimates
or suggestions for making this form
simpler, we would be happy to hear
from you. See the instructions for the
tax return with which this form is filed.