How to establish, maintain and use timber depletion accounts
Section 1221 of the Internal Revenue Code defines capital expenditures. In general, these are amounts spent to acquire real estate or equipment, or to make improvements that increase the value of real estate or equipment already owned. Forestry examples include land, buildings, standing timber, reforestation costs, and tractors and trucks. Property owners who incur capital costs are entitled to offset or deduct them (called recovery of capital expenses) against income arising from the property-and in some cases against income from other sources. In this article, we will discuss those capital expenditures directly related to standing timber.