Services

Timber Sale Administration (click for more information)

Timber Taxes (click for more information)

Services for Professional Loggers and Timber Harvesters (click for more information)

GIS/GPS services; latest in technology and software such as Garmin, Cresent A100 with 60 cm accuracy, GPS (Geo Positioning System), & fGIS

Map making; topographic, aerial photographic, vegetative types, soil types, trail maps, ect.

Management Plans

Timberland Iinventories

Wildlife Management

Resource Assessment

Appraisals (click for more information)

HVIP Hardwood Bucking (click for more information)

Other Services Available at your Request:

• Prepare timber depletion accounts for your property, which result in substantial tax savings.
• Prepare Federal Form T to report your capital gain/loss timber income, and substantiate your timber depletion allowance for the IRS.
• Inventories of your timberland
• Reforestation of your property
• Timber appraisals for land purchases, timber trespass cases, timber inventory, and legal disputes.
• Annual post harvest inspections to monitor the condition of your forest. This is important to watch for timber theft and trespass, monitor for insect/disease problems, identify and document storm damage.
• Expert witness testimony
• Design and implement wildlife, aesthetic, or recreational improvements which will increase your enjoyment and use of the forest. This can include items such as wildlife habitat improvements, scenic view cuttings, trail and bridge construction, and recreational site development.

Timber Sale Administration

Our timber sale administration procedures for landowners typically proceed as follows:

• Meet with client and discuss their management goals and objectives (hunting opportunities, income from timber sale, wildlife habitat, reforestation, aesthetics, recreational opportunities, etc.)
• Inventory property and prepare a management plan in accordance with goals and objectives.
• Preparation work for timber sales, mark & gps sale boundaries, mark trees to cut or leave, determine species, volume, and value of timber being harvested.
• Check all work for quality control.
• Have client review sale preparation work.
• Put the sale up for bid to as many qualified and reputable applicants as possible. For some low value timber sales (typically small hardwood pulp timber stand improvement sales) it is not cost effective to bid the sale out. In these situations we recommend negotiating the sale with a logging company of choice and usually sell the timber on a scale basis.
• After the bid is awarded, the down payments and security deposits are collected. All financial transactions are run through the Metcalfe Forestry escrow account. All logging contracts have provisions verifying compliance with described standards of performance and insurance requirements.
• During the timber harvest we conduct site visits to ensure the logger is meeting our expectations.
• After the harvest and after the logger meets all of the described standards, including post-harvest cleanup operations, then the security deposit is returned.
• Prepare timber depletion accounts & Form T timber tax forms are filled out upon request.

The services that Metcalfe Forestry provides for the average client are as follows:

• Map making; topographic, aerial photographic, vegetative types, soil types, trail maps, ect.
• Woods road location and layout
• Identifying and marking the trees to be cut
• All marking paint, orange ribbon, and other supplies
• Calculating the volume, grade, and value of marked trees
• Advertising your timber for sale
• Showing your timber sale to prospective buyers
• Selecting logging contractors
• Identifying important timber sale contract requirements
• Drafting a legally binding timber sale agreement
• Inspection of your timber harvesting operation to ensure contract compliance
• Posting accounting reports for all timber sale transactions to ensure you receive the best tax advantage
• Workers compensation and liability insurance
• Correspondence, phone calls and meetings
• Notifying you when your next timber harvest is possible

Timber Taxes

The tax treatment of timber sale income and management expenses is a highly specialized area of the federal tax code. Interpreting the provisions of Sections 631 (a) or 631 (b) requires the services of a professional forester. Many tax preparers do not encounter timber sales on a frequent basis and are not aware of the tax provisions or how to implement them for maximum tax savings.

Report timber income as LONG or SHORT-TERM CAPITAL GAIN. The tax code allows timber income to be reported as capital gain or as ordinary income. In all situations timber income receives much lower taxation if reported as capital gain, and eliminates the possibility of raising ordinary income to a higher tax bracket.

The first step is to create a DEPLETION ACCOUNT. All depletion accounts are based upon the actual cost basis of the timberland as of the date of acquisition whether by purchase, gift, or inheritance, and allocated into land and timber accounts using fair market values of the respective components of value at that date.

The value allocated to the trees is called the cost basis of the timber and is used to determine the Depletion Deduction. For example, if you sold a cord of timber for $20.00 and your depletion deduction was $10.00 per cord, your net taxable gain would be $20 minus $10, or $10.00. The depletion deduction is a tax free return of capital. The higher the depletion deduction, the less income tax you pay. The reverse is true as well. People who have recently purchased their timberland usually pay little or no tax on a sale of timber. People who bought their land a long time ago will pay more in tax because their cost basis is lower.

The next step is to record all MANAGEMENT EXPENSES associated with the timber sale and management of the property. Some management expenses such as: payments to a forester to sell the timber, advertising, contract expense,etc., can be directly deducted from timber income. Other expenses, such as: property boundary survey, tree planting, etc., will have to be capitalized into the cost basis and recovered through depletion. Either way, documenting all expenses will reduce the tax liability.

The final step is to prepare a FEDERAL FORM T which substantiates the depletion deduction, expenses, and capital gain or loss. The Form T is filed with the general income tax return at year-end.

If reported in this manner, timber income will receive a tax rate lower than your ordinary income marginal rate and you will not have to pay the 15.3 % self-employment tax (social security). When the depletion deduction is included, a savings of 30 % or more is possible on your tax bill.

Amended tax returns can be filed to claim a tax refund from previous timber sales. These returns must be filed within two-years of the original filing date. For most taxpayers this means three calendar tax years from April 15th of the current tax season.

We do not advise on, or prepare general income tax returns - we only specialize in timber. In that capacity, we can assess your potential tax savings, create your depletion account, and prepare the Federal Form T for you or your tax preparer.

James A. Burns
Forestry Consultant, A.C.F.

Jim Burns is a professional forester who owns and operates Burns Timber Tax Services and works in conjunction with Susan Metcalfe at Metcalfe Forestry LLC. For more information call Susan at (989) 348-3596 with your questions.

Other Articles by James Burns on Timber Taxes

HVIP Hardwood Bucking

For Loggers

Our forestry consulting business can help you improve production and save money by providing the following services:

• Timber inventories - essential for:
  
  • bidding on timber sales,
  • purchasing forested land,
  • collateral for bank loans,
  • marketing tool for cutting timber to maximize profit,
  • information needed for substantial money savings on your federal and state
  • income taxes.
    
• Timber marking – and calculate the volume, grade, and value of marked trees.
• Harvest boundary lines painted or flagged in using the most accurate non-military GPS equipment currently available.
• Mapping and acreage calculation using aerial & satellite imagery and GIS software.
• Inventory Control Planning – prepare & update timber harvest plans on a weekly, monthly, &/or annual basis. Allocate your inventory of cutting contracts by location, date of expiration, cash invested to-date, and best time & market conditions for logging.
• Land valuation for bank loans by establishing the true fair market value of your forested property - increase your loan capability.
• Timber tax and Form T preparation – receive large tax savings- post accounting reports for all timber sale transactions to ensure you receive the best tax advantage.
• Available on short notice throughout the United States.

Metcalfe Forestry, LLC is a fully insured and registered forest consulting company based out of Grayling, Michigan. We currently employ a staff of three professional foresters and are affiliated with other forestry specialists throughout the USA.

We have worked for logging companies, private landowners, hunt clubs, non-profit organizations, and have done extensive contract work for the Michigan DNR, USDA Forest Service, Bureau of Indian Affairs, various forest industries and other consulting forester’s since 1998. Having worked cruising & marking on most Michigan DNR districts, we understand how the state determines timber volume and can estimate how much overrun or underrun to expect.

Much of our work involves setting up and selling timber sales, which requires extensive knowledge of forest ecosystems, timber values, and inventory methods.

If you are getting bank loans on you timberlands, make sure your bank knows the true asset value (timber value along with bare land value). Make sure you are not over collateralized. Ensure you are not paying too much tax and file your timber taxes correctly with us. We are affiliated with Burns Timber Tax Services and are able to give you large tax savings on your federal and state income tax.

All information shared with or collected by Metcalfe Forestry LLC is considered strictly confidential. It is privileged to the client and not divulged to any other entity unless information is released in writing by the client.

Appraisals

Timber inventory and analysis

Timber casualty loss appraisals

Estate settlement appraisals

Collateral valuation for bank loans