Tax Implications of Forest Property Exchanges
For various reasons, it may be advantageous for woodland owners to voluntarily exchange some or all of their timber and/or timberland for other property. For example, exchanges can be used to consolidate or diversify forest holdings and other investments; to obtain greater cash flow; and eliminate or reduce management problems. In many cases, voluntary exchanges--rather than sales and purchase--are used for these and other purposes in order to postpone the payment of income tax on the difference between the value of the property given up and the property's basis. This article deals with voluntary exchanges. These should not be confused with postponing the recognition of gain or loss when property is involuntarily converted, such as with a casualty or condemnation, and qualified replacement property acquired with the proceeds.