Prague & Company, P.C. offers tax consulting and compliance services related to investments in timber, whether these investments are made by individuals or through various private equity entities.
While some of our timber clients are individuals who own tracts of land and care for them as an investment with the intent of turning it into a trade or business, the majority of our timber clients invest primarily through private equity partnerships, which own various types of investments: directly-held mature forests, leased tracts from unrelated landowners, operating working tree farms, new tracts purchased in order to start plantations from the ground up and any number of other types of timber investments. Additionally, some of these entities own logging operations and other related businesses through corporate or other investment vehicles. Many of our private equity partnership clients invest through Real Estate Investment Trusts (REITs), which hold domestic investments.
Prague & Company, P.C. has experience with various aspects of timber taxation under the Internal Revenue Code, including:
- Satisfying the requirements of IRC §631(b) in order to secure capital gain treatment
- Understanding the workings of IRC §631(a), how to elect it and what it means
- Explaining the different tax treatments that result from owning your timber as an investment, trade or business, or as a hobby or personal use
- Allocating purchase price across merchantable trees, pre-merchantable trees, land and equipment accounts
- Understanding state implications on using an LLC for investments
- Calculating depletion, whether it is based on an entire property or specific species of tree
- Lump-Sum versus Pay-As-Cut (stumpage) income
- Structuring timber investments for non-profit investors and associated guidance on election §631(a) treatment
- Assisting with meeting Internal Revenue Code requirements related to Real Estate Investment Trusts (REITs), including income and asset testing as well as compliance with record-keeping and documentation requirements
- Advising on “check-the-box” elections for entities owning timber investment
- Applying passive loss rules interact with your timber investment
- Availability of reforestation tax incentives
Among the many Tax Planning and Compliance Services Prague & Company, P.C. offers, we are experienced in the preparation of required IRS forms, such as Form T, in order to report depletion, earnings from §631(b) contracts, §631(a) elections and to maintain cost bases. We also have experience with the multi-state taxation of timber investments.
For partnerships and other types of entities owning timber, our Partnership and Private Equity Administration can provide outsourced accounting and tax services to allow a company and their management team to focus on identifying investment opportunities and overseeing other aspects of their business instead of being consumed with the ongoing accounting and tax functions.