Purchased new 49acre tract of land for a Farm Pine Plantation what can be deducted/depreciated?

Forum|Forum|3 years ago
February 10, 2023
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Good morning

I have an existing farm (pine plantation of approximately 280 acres). Just purchased an additional 49 acre tract of contagious land in the 2022 tax year. Most likely I will never sell this land it will be passed on to the next generation through my will. The land has utility easements and timber on it, I plan to clear cut the timber in 2023 or 2024 tax year. I paid $110,000 for the land since I have no intention of ever selling the land can I assign the full $110,000 cost to the value of the timber and $0 cost to the value of the land?

Also should this information be captured under "Farm Assets", "nonresidential real estate" in Turbo Tax?

Thanks for the help!

TurboTax Home & Biz Windows

Best answer by KrisD15

No, the land purchase is immaterial since land does not depreciate.

Most likely, when you sell the timber, it will be a Capital Gain, so you might want to hold it for a year first.

Land does not depreciate, but you might be able to claim "Depletion" against the income from the timber you sell.

What you paid for the property and the depletion for the timber MAY be a factor if the land is later inherited and sold.

The basis would be stepped-up unless it is sold later at a loss.

Here is more information.

ThomasM125

You couldn't add the cost of the land to the timber since you won't be selling the land when you harvest the timber. The timber would seem to be a farm asset since you intend to sell it.

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