Tax ?
Page 1 of 2 1 2 LastLast
Results 1 to 10 of 18
Like Tree52Likes

Thread: Tax ?

  1. Top | #1
    userjh160's Avatar
    Join Date
    Aug 2015
    Last Online
    Today @ 07:36 PM
    Location
    North Louisiana
    Posts
    319
    Thanks
    157
    Thanked 50 Times in 23 Posts

    Tax ?

    Back in May we had several large trees removed in the back yard. A small logger came in behind the tree service and hauled a couple small loads of pine for us to recoup some of the cost. We received a form (1099-SA) I think, from the timber co.

    The net transaction on our end, counting the tree service, was around -$3000. I have the receipt for the removal.

    Maybe someone has had a similar situation. Wondering if we actually owe on the "income". I'll end up consulting a tax pro on this before filing, just curious as to your thoughts.

    Sent from my SM-G930V using Tapatalk
    Herminator and JD4044M like this.
    2017 3038E; RC2048, 4' Box Blade, Forks, 5' Rear Blade, 2017 Z920M

  2. Remove Advertisements
    GreenTractorTalk.com
    Advertisements
     

  3. Top | #2
    ejb69's Avatar
    Join Date
    Dec 2011
    Last Online
    Today @ 08:33 AM
    Location
    Green Bay / Pembine Wi
    Posts
    2,193
    Thanks
    52
    Thanked 124 Times in 120 Posts
    I’ve never sold timber. But trees are a crop just like corn or any other ag crop and any profit would be taxed. When one sells a house or property the government taxes any capital gains. One pays tax any interest from money one has in a savings account that was already taxed when you earned it.

    Income is taxed doesn’t matter where it comes from.
    Eric

    2011 1026R / H120 / 60D auto-connect, independent-lift mmm / 54" snowblower / 4' KK Pro rotary mower / KK 4' tiller

  4. Top | #3

    Join Date
    Dec 2013
    Last Online
    Today @ 08:00 PM
    Location
    Southwest Ohio
    Posts
    3,280
    Thanks
    1,074
    Thanked 758 Times in 554 Posts
    Quote Originally Posted by userjh160 View Post
    Back in May we had several large trees removed in the back yard. A small logger came in behind the tree service and hauled a couple small loads of pine for us to recoup some of the cost. We received a form (1099-SA) I think, from the timber co.

    The net transaction on our end, counting the tree service, was around -$3000. I have the receipt for the removal.

    Maybe someone has had a similar situation. Wondering if we actually owe on the "income". I'll end up consulting a tax pro on this before filing, just curious as to your thoughts.

    Sent from my SM-G930V using Tapatalk
    It was probably a 1099-MISC. Was the amount in box 7? Or was it box 3?

    I want to be clear on your comment about the "net transaction". Did you end up with a net of $3000 out of pocket? In other words - it cost $5000 to cut down the trees and the timber company gave you $2000.... so you're still out of pocket $3000 even after the timber company paid you?

    If you're truly net out of pocket on this deal, you'll owe no money on the money received from the timber company. All you did was sell a personal item (logs laying on the ground) for less than you paid for it. Kind of the same idea as a garage sale. But, since it's a personal item (assuming you're not in the timber business), you also cannot take the $3000 as any sort of loss. (NOTE: There could be an exception to this if you had to remove the trees due to some sort of natural disaster, but...)

    Here's the kicker though - even though you won't owe any tax money on the transaction (assuming you were net out of pocket), you still need to report this on your tax return somewhere since the timber company gave you a 1099. I would probably report it on the "Other Income" line of your 1040 (line 21?). You can try and squeeze in something like "Amt rptd on 1099 - $2000, less expenses incurred - $5000" and put "0" in the amount box. Or you can write "See Attached" and then write up a narrative explaining the situation and include it when filing the return.

    Let me know if I misunderstood your comment about "net transaction".
    '05 JD 3520 Open Station w/ 300CX FEL
    Grandpa's '52 Farmall Cub
    A couple of old Gravelys
    Help a Vet and his dog

  5. The Following User Says Thank You to mark02tj For This Useful Post:

    userjh160 (01-26-2019)

  6. Remove Advertisements
    GreenTractorTalk.com
    Advertisements
     

  7. Top | #4

    Join Date
    Jun 2014
    Last Online
    Today @ 08:31 PM
    Location
    Berlin, MA
    Posts
    4,542
    Thanks
    94
    Thanked 847 Times in 645 Posts
    I suspect that they sent you a 1099-S. (a 1099-SA is for distributions from a Health Savings Account!)

    You'll have to claim that income but essentially, you had a little business activity for the year. You should be able to canx out that income with the expense of the tree cutting service. It all just means that you'll have more forms to fill out this year than you usually do.
    mark02tj, userjh160 and Herminator like this.
    D160 Mower/Bagger.
    2014 2032R tractor/H130 FEL w/Bolt-On Hooks/54" Snow Plow/iMatch Quick-Hitch/County Line 5' Scraper blade/County Line Carry-All/Artillian 42" Forks & QH Adapter/JD Ballast Box/Frontier SB1164 3PH Blower/Leinbach PHD/Wallenstien BX42 Chipper

  8. The Following 2 Users Say Thank You to JimR For This Useful Post:

    mark02tj (01-26-2019), userjh160 (01-26-2019)

  9. Top | #5

    Join Date
    Mar 2015
    Last Online
    Today @ 07:12 PM
    Location
    Eastern Virginia, United States
    Posts
    4,406
    Thanks
    333
    Thanked 799 Times in 522 Posts

    Selling timber

    Trees are a crop as mentioned above but there are some sections of the tax code relating to timber sales. I'm not sure they apply in your case since I think you can argue that the sale is a function of removal of the trees but here some of the code as I remember it. Timber sales are one reason I quit doing my own taxes and now pay an accountant so I could be a little out of date with some of this. I grow trees as a business so I'm not sure how much of this applies to your situation.

    Timber can be treated as a long term capital gain depending on the length of time you owned the trees. Like any capital gain the taxable income is the sale price minus the expense of the sale minus the basis. The basis for timber is frequently zero but if you bought a tract of timber 5 years ago and sell it today there would be a basis available. On the other hand if you started the trees from seedlings, expensed the reforestation costs as ordinary expense your basis will be zero.

    There is a cap on the amount of reforestation cost that can be expensed per year. It was $ 7,500 but that may have changed. Large timber companies that regularly incur costs over the cap may include the reforestation costs as part of the basis rather than expensing the cost in a year.

    If you haven't owned the trees long enough to qualify for capital gain treatment, then they are treated as ordinary income. That may be true anyway if this is a one time sale incidental to owning your home.

    In any case, I would definitely ask your tax advisor if you can deduct the cost of removing the trees from the amount your received from the company. If so, you may have no taxable gain at all.

    Treefarmer
    John Deere 790, 300 loader w Ken's Bolt on Hooks & Piranha tooth bar, grapple, back blade, box blade, Bush Hog mower, couple of red tractors, hay equipment, various old stuff some red, one orange, some I don't remember

  10. The Following User Says Thank You to Treefarmer For This Useful Post:

    userjh160 (01-26-2019)

  11. Top | #6

    Join Date
    Jun 2014
    Last Online
    Today @ 08:31 PM
    Location
    Berlin, MA
    Posts
    4,542
    Thanks
    94
    Thanked 847 Times in 645 Posts
    Quote Originally Posted by mark02tj View Post
    It was probably a 1099-MISC. Was the amount in box 7? Or was it box 3?
    Real Estate Transactions and Timber Sales are reported on Form 1099-S.
    mark02tj, Herminator and JD4044M like this.
    D160 Mower/Bagger.
    2014 2032R tractor/H130 FEL w/Bolt-On Hooks/54" Snow Plow/iMatch Quick-Hitch/County Line 5' Scraper blade/County Line Carry-All/Artillian 42" Forks & QH Adapter/JD Ballast Box/Frontier SB1164 3PH Blower/Leinbach PHD/Wallenstien BX42 Chipper

  12. The Following User Says Thank You to JimR For This Useful Post:

    mark02tj (01-26-2019)

  13. Top | #7

    Join Date
    Dec 2013
    Last Online
    Today @ 08:00 PM
    Location
    Southwest Ohio
    Posts
    3,280
    Thanks
    1,074
    Thanked 758 Times in 554 Posts
    Quote Originally Posted by ejb69 View Post
    I’ve never sold timber. But trees are a crop just like corn or any other ag crop and any profit would be taxed. When one sells a house or property the government taxes any capital gains. One pays tax any interest from money one has in a savings account that was already taxed when you earned it.

    Income is taxed doesn’t matter where it comes from.
    In most cases, if someone sells their house that was their principle residence for a specified period of time, they pay no capital gains on it. If you sell a rental property, you would pay taxes on any gain recognized on the sale.

    Also, trees aren't a crop like any other ag crop. Most ag crops (corn, beans, wheat) are planted and harvested within a year. They are usually under the control of the same person (the farmer) for the entire planting/growing/harvesting process. Trees take many years between planting and harvesting. It's not unusual for the land on which there is a stand of timber to change hands multiple times during the growing process. That means that the process of calculating the basis (ie - cost from which the net profit is determined) of the timber is much different than figuring the basis of a corn or bean crop. And since tax is paid on the profit (selling price - basis), figuring the basis is all important!

    While your statement about "Income is taxed doesn't matter where it comes from" is basically correct, it is waaay oversimplified. Income will be taxed, but it's taxed in different ways. For example, if you have a little business on the side (or you're totally self-employed), your business income is subject to "self-employment tax" (SE tax), which is essentially the Social Security tax that is normally withheld from your paycheck. If you have a couple of rental properties, generally the rental income is not subject to SE tax. If you sell a stock at a gain and you've held it for a specified period of time, that income is taxed at a capital gains rate which may be less than your marginal bracket for your wage income. And, if you sell a stock at a loss, or have a loss in your business, you can deduct that loss from your other income, whereas if you have a loss from selling a personal item, you cannot deduct that loss.

    I'm not trying to start an argument, just trying to say that when giving tax "advice", there's a lot to it.

    The bottom line is that the OP should consult a TAX PROFESSIONAL which isn't necessarily the person at HR Block or in the little Jackson-Hewitt cubicle that pops up in the entrance at Wal-Mart this time of year. Hopefully my other post at least gives the OP some information that he can research if he decides to prepare his own return.
    '05 JD 3520 Open Station w/ 300CX FEL
    Grandpa's '52 Farmall Cub
    A couple of old Gravelys
    Help a Vet and his dog

  14. The Following 2 Users Say Thank You to mark02tj For This Useful Post:

    Herminator (01-26-2019), userjh160 (01-26-2019)

  15. Top | #8
    Zebrafive's Avatar
    Join Date
    Apr 2012
    Last Online
    Today @ 03:07 PM
    Location
    South West Michigan
    Posts
    7,041
    Thanks
    1,505
    Thanked 583 Times in 512 Posts
    I would probably just pay the tax on the amount of the 1099SA. Probably cost less than having a pro do your taxes. But without knowing how much your tax liability is, only you can decide.

    Did you pay $3700 and sell timber for $700 and owe on $700? 20% bracket would be $140

    Or pay $10,000 and sell timber for $7,000 and owe on $7,000? big difference on what you would owe. 20% bracket would be $1400

    Pay on the full amount IRS will have no reason to question it.

    Pay a Pro and they should handle any questions if the IRS questions it.
    Herminator and JD4044M like this.
    J
    John Deere 2030 w/245SL Loader
    John Deere 6415 w/640SL Loader
    John Deere 285 50" deck Stolen May 2017
    John Deere x485 62" deck AWS
    Kawasaki Mule 2510 4x4 bought new 1996
    Ford F250 4x4 bought new 1978

  16. The Following User Says Thank You to Zebrafive For This Useful Post:

    userjh160 (01-26-2019)

  17. Top | #9
    userjh160's Avatar
    Join Date
    Aug 2015
    Last Online
    Today @ 07:36 PM
    Location
    North Louisiana
    Posts
    319
    Thanks
    157
    Thanked 50 Times in 23 Posts
    Quote Originally Posted by mark02tj View Post
    It was probably a 1099-MISC. Was the amount in box 7? Or was it box 3?

    I want to be clear on your comment about the "net transaction". Did you end up with a net of $3000 out of pocket? In other words - it cost $5000 to cut down the trees and the timber company gave you $2000.... so you're still out of pocket $3000 even after the timber company paid you?

    If you're truly net out of pocket on this deal, you'll owe no money on the money received from the timber company. All you did was sell a personal item (logs laying on the ground) for less than you paid for it. Kind of the same idea as a garage sale. But, since it's a personal item (assuming you're not in the timber business), you also cannot take the $3000 as any sort of loss. (NOTE: There could be an exception to this if you had to remove the trees due to some sort of natural disaster, but...)

    Here's the kicker though - even though you won't owe any tax money on the transaction (assuming you were net out of pocket), you still need to report this on your tax return somewhere since the timber company gave you a 1099. I would probably report it on the "Other Income" line of your 1040 (line 21?). You can try and squeeze in something like "Amt rptd on 1099 - $2000, less expenses incurred - $5000" and put "0" in the amount box. Or you can write "See Attached" and then write up a narrative explaining the situation and include it when filing the return.

    Let me know if I misunderstood your comment about "net transaction".
    That's exactly it. We ended up $3k out of pocket. Not looking to claim a loss or anything like that, just thinking of the job in its entirety.

    Sent from my SM-G930V using Tapatalk
    2017 3038E; RC2048, 4' Box Blade, Forks, 5' Rear Blade, 2017 Z920M

  18. Top | #10
    userjh160's Avatar
    Join Date
    Aug 2015
    Last Online
    Today @ 07:36 PM
    Location
    North Louisiana
    Posts
    319
    Thanks
    157
    Thanked 50 Times in 23 Posts
    Thanks for the opinions and feedback. I do work in the timber industry, and I have some idea of the ins and outs, but these jobs are money makers, whereas this job was a net loss.

    I'll definitely report the income, but interested to see how the cost for removal should be handled. Not going to be a large sum in either case, but I'd rather not give $1 that I dont have to.

    Sent from my SM-G930V using Tapatalk
    2017 3038E; RC2048, 4' Box Blade, Forks, 5' Rear Blade, 2017 Z920M

  19. Remove Advertisements
    GreenTractorTalk.com
    Advertisements
     

Page 1 of 2 1 2 LastLast

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •