Question

For my Federal Taxes class the question below has to be answered and has to be approx couple of paragraphs.. any help would be greatly appreciated!

Look up the definition of Reforestation amortization. Write a couple of paragraphs about Reforestation amortization and what you learned? Why it's interesting to you and explain?

Answer 1

Qualified reforestation costs, for the purposes of both the deduction and amortization, are the direct expenses incurred in establishing a stand of timber—whether by planting, seeding, or natural regeneration. Expenditures for timber stand improvement (TSI) practices in established stands do not qualify for either the deduction or amortization. In general, these expenses are incurred for maintenance of the stand, however, and thus are eligible for deduction as a current expense, subject to the passive loss rules. Alternatively, they may be capitalized and deducted when the timber is cut, sold, or otherwise disposed of.

To qualify for both the deduction and amortization, the reforested or afforested property must be at least 1 acre in size and be located in the United States. The site must be held by the taxpayer for planting, cultivating, caring for, and cutting of trees for sale or for use in producing commercial timber products. Both owned and leased properties qualify.Christmas tree establishment expenditures do not qualify for either the deduction or amortization. Similarly, the costs of planting trees in shelterbelts or windbreaks, or of planting trees primarily for nut production or for sale as ornamentals, do not qualify.

Reforestation expenditures eligible for the deduction and amortization do not include costs reimbursed under a government cost-sharing program, unless the reimbursed amount is included in the recipient’s gross income. If the recipient includes the cost-sharing payment in his or her gross income, the total reforestation cost (including the amount reimbursed by the cost-sharing payment) qualifies for both provisions. Reforestation costs incurred under the CRP program, including the costsharing payments received if reported as income, are eligible for both the deduction and amortization if not deducted under IRC section 175.