stumpage and timber proceeds

#3 10-18-2003, 06:53 AM

bm30003700[at]aol.com (BM30003700) wrote:

- quote -

> my client received a 1099S showing gross proceeds of $16832
> and, in the address or legal description box, the words
> "timber proceeds".
> it looks to me as though, if my client had owned the timber
> or the right to cut it for more than a year, she could elect
> to consider this as a sale or exchange.
> is this normal to show timber proceeds on a 1099S? it looks
> as though there are situations where the election cannot be
> made, and hence there is no sale or exchange (ie owning
> timber less than one year).
> if so, it would seem appropriate to me to at least issue a
> letter with the 1099S stating that, though it is being
> reported on 1099S as a sale or exchange, the recipient needs
> to make a further determination.
> also, husband, same client, recieved 1099Misc for $6711 for
> nonemployee compensation for stumpage removed from his land.
> at first, i thought the amount being in the nonemployee
> compensation box, rather than other income, was incorrect.
> then, however, my client told me he paid an individual to
> remove stumpage.
> that individual took the stumpage to a mill, and received
> money from the mill, from which he took money for his work,
> and then gave my client the remainder ($6711).
> i think now that this really is self employment income,
> based on my client's description of events (and that the
> 1099Misc should have been for the $6711 plus whatever the
> person removing stumpage received for his efforts)<<<<

Has this client ever previously "deducted" any expenses or
accumulated such expenses related to the specific timber
sold?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#2 10-18-2003, 06:34 AM

You have asked a complex question , and some research is requried to
correctly answer this question , may I sugguest that you go to the web
site at
www.timbertax.org and review the possible twist and turns involved
with Timber transactions . There are options available in the
treatment of this Stumpage contract . Good Luck

JAD E.A.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#1 10-18-2003, 02:29 AM

"BM30003700" <bm30003700[at]aol.com> wrote:

- quote -

> my client received a 1099S showing gross proceeds of $16832
> and, in the address or legal description box, the words
> "timber proceeds".
> it looks to me as though, if my client had owned the timber
> or the right to cut it for more than a year, she could elect
> to consider this as a sale or exchange.
> is this normal to show timber proceeds on a 1099S? it looks
> as though there are situations where the election cannot be
> made, and hence there is no sale or exchange (ie owning
> timber less than one year).
> if so, it would seem appropriate to me to at least issue a
> letter with the 1099S stating that, though it is being
> reported on 1099S as a sale or exchange, the recipient needs
> to make a further determination.
> also, husband, same client, recieved 1099Misc for $6711 for
> nonemployee compensation for stumpage removed from his land.
> at first, i thought the amount being in the nonemployee
> compensation box, rather than other income, was incorrect.
> then, however, my client told me he paid an individual to
> remove stumpage.
> that individual took the stumpage to a mill, and received
> money from the mill, from which he took money for his work,
> and then gave my client the remainder ($6711).
> i think now that this really is self employment income,
> based on my client's description of events (and that the
> 1099Misc should have been for the $6711 plus whatever the
> person removing stumpage received for his efforts)

It depends.....If the property which the timber (and stump)
was on was acquired as an investment (ie the buying and
selling of land for their timber is NOT their primary
business...in which case its just ordinary income), the
proceeds likely should be applied as a reduction in the
underlying property cost. The money paid to remove the stump
less the amount recovered would likewise be added to basis.

I have a client that acquires land in 2-900 acre blocks. He
then sub-divides them, first selling any timber, then making
nominal improvements and sells in 5-10 acre lots. Since he
buys and sells this land, it makes him a dealer in the
property and the property is inventory.

Mike Lewis, CPA

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

10-13-2003, 05:47 AM

BM30003700 wrote:

- quote -

> my client received a 1099S showing gross proceeds of $16832
> and, in the address or legal description box, the words
> "timber proceeds".
> it looks to me as though, if my client had owned the timber
> or the right to cut it for more than a year, she could elect
> to consider this as a sale or exchange.
> is this normal to show timber proceeds on a 1099S? it looks
> as though there are situations where the election cannot be
> made, and hence there is no sale or exchange (ie owning
> timber less than one year).

Yes, The 1099S form is correction; the "S" stands for
"stumpage". (I'm not even going to put one of those smiley
faces here this time!)

- quote -

> if so, it would seem appropriate to me to at least issue a
> letter with the 1099S stating that, though it is being
> reported on 1099S as a sale or exchange, the recipient needs
> to make a further determination.

I always love it when I see "Consult your taxman for further
information", or words to that effect.

- quote -

> also, husband, same client, recieved 1099Misc for $6711 for
> nonemployee compensation for stumpage removed from his land.
> at first, i thought the amount being in the nonemployee
> compensation box, rather than other income, was incorrect.
> then, however, my client told me he paid an individual to
> remove stumpage.
> that individual took the stumpage to a mill, and received
> money from the mill, from which he took money for his work,
> and then gave my client the remainder ($6711).
> i think now that this really is self employment income,
> based on my client's description of events (and that the
> 1099Misc should have been for the $6711 plus whatever the
> person removing stumpage received for his efforts)

Who gave him the 1099misc? The mill? Whoever, I guess
doesn't matter. At least the 1099'misc wasn't for the whole
amount making him reponsible for giving another one to the
subcontractor.

Cheer$,
Harlan Lunsford, EA in LA, where timber is the state's chief crop.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#-1 10-11-2003, 07:41 AM

my client received a 1099S showing gross proceeds of $16832
and, in the address or legal description box, the words
"timber proceeds".

it looks to me as though, if my client had owned the timber
or the right to cut it for more than a year, she could elect
to consider this as a sale or exchange.

is this normal to show timber proceeds on a 1099S? it looks
as though there are situations where the election cannot be
made, and hence there is no sale or exchange (ie owning
timber less than one year).

if so, it would seem appropriate to me to at least issue a
letter with the 1099S stating that, though it is being
reported on 1099S as a sale or exchange, the recipient needs
to make a further determination.

also, husband, same client, recieved 1099Misc for $6711 for
nonemployee compensation for stumpage removed from his land.

at first, i thought the amount being in the nonemployee
compensation box, rather than other income, was incorrect.
then, however, my client told me he paid an individual to
remove stumpage.

that individual took the stumpage to a mill, and received
money from the mill, from which he took money for his work,
and then gave my client the remainder ($6711).

i think now that this really is self employment income,
based on my client's description of events (and that the
1099Misc should have been for the $6711 plus whatever the
person removing stumpage received for his efforts)

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Similar Threads
Thread	Forum	Replies	Last Post
Mortgage or loan proceeds? Danno: I am setting up a mortgage as a new liability account, but I don't find any matching entry for the proceeds from the loan when I do. In Money,...	Microsoft Money	5	01-29-2008 04:45 PM
Loan Proceeds Rick Beckenhauer: I use MONEY 2004. When I tried to set up a loan and assign the loan proceeds to a bank account (checking), I found out after talking to tech...	Microsoft Money	2	01-20-2004 11:54 PM
Where are the Loan Proceeds? Marina G: I have set up a loan in Money 2003 Canadian Edition. The loan proceeds are being deposited into one of my other accounts. However, MS Money...	Microsoft Money	5	09-09-2003 04:53 PM
Distribute loan proceeds Gene Dumm: I have Money 2000. I just financed my house and am trying to distribute the loan proceeds. Money shows the liability when I set up the mortgage...	Microsoft Money	1	08-30-2003 11:02 PM
Recording Loan Proceeds... Tom: I have set up a 2nd mortgage loan, amortized, auto- payments and all... no problem. But the proceeds from this loan were deposited into my...	Microsoft Money	2	08-28-2003 04:13 AM

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode