How do I add land as an asset on a farm partnership return?

If this is a previously reported partnership, you may wish to contact the professional who prepared the returns in the past to be sure you are consistent in how you report this activity to the IRS. If this activity has been reported on IRS Form T (Timber), be aware that TurboTax does not support this form.

For timberland, there are three options for reporting this activity:

If your partnership is in the business of raising and selling timber, you would report this activity (income and expenses) under Farming in TurboTax Business.

However, if the partnership is not an active participant in a timber business, but is an investor in timberland, you may report related expenses as Miscellaneous Business Expenses.

You also have the option to capitalize timber-related expenses by adding the costs to the basis in the timber. Any gain or loss on the sale of timber would be reduced by the adjusted basis in the timber.

Here is an authoritative source of information to Determine Your Basis:

You are required to estimate, with respect to each separate timber account established, the total units (bd. ft. measure, log scale, cords, or other units) of timber reasonably known, or on good evidence believed, to have existed on the ground on the date of acquisition. If cutting has occurred, the volume removed must be figured into the original volume. In essence you are growing the forest in reverse to the date of acquisition.

Once the volume by type has been established the fair market value of the timber on the date of acquisition must be determined. The best available evidence of timber values on this date must be used. The price actually paid for timber similar in character and quality in the location of the subject property on or near the valuation date can be used. Such information can usually be obtained from consulting foresters or timber buyers. Published price reports may be used if the average prices are adjusted to reflect differences for the timber quality. If timber has been disposed of since the acquisition the basis must be reduced by the basis allowed for any previous sales or other disposals.