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Notes (245445)

The document discusses recommendations for record keeping for timberland activities, including using a cash accounting system with a journal and ledger. It also discusses establishing land and timber accounts, including merchantable timber which can be depleted as it is cut.

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22 views

Notes (245445)

The document discusses recommendations for record keeping for timberland activities, including using a cash accounting system with a journal and ledger. It also discusses establishing land and timber accounts, including merchantable timber which can be depleted as it is cut.

Uploaded by

cydney caliwag
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Notes

 The value estimated may be market value, insurable value, investment value, or some other
properly Transfer of ownership

 ecord Keeping
 The IRS does not require that a formal bookkeeping system be maintained. However, it is
recommended for accuracy and clarity if you had to reconstruct your timber activities. The
accounts which are required in all circumstances in which a cost basis is established are
land, merchantable timber volume, and merchantable timber value. The basic
recommendations are:
 Cash Accounting System - With this system the activities (transactions) associated
with the operation are recorded when the cash is actually received or paid out.
 Journal - This is a diary which contains a listing of the various business transactions.
Each transaction entry should describe the transaction and give the accounts and
dollar values involved...|example|
 Ledger - All of the journal entries for each account are summarized in the ledger so
that balances can be determined...|example|
 Once established, your accounting system and tax year can only be changed with the
permission of the IRS. If you do not keep records you must use the calendar year. If you
keep records you may in some limited circumstances be authorized to use either the
calendar year or a fiscal year. For additional information on accounting methods see IRS
Publication 538, "Accounting Periods and Methods".
 Land Accounts
 Assets that are placed in the land account include the land itself, non-depreciable land
improvements, and depreciable land improvements. The amount entered for the land is the
proportion of the total acquisition cost attributable to the bare land. This amount can not be
depreciated and is recoverable when the land is disposed of. Non-depreciable land
improvements include earthwork betterment's of a permanent character. Recovery of these
assets is again when the land is disposed of. Depreciable land improvements include
nonpermanent structures and improvements. Recovery of theses assets is by depreciation.
 The amount placed in this account will depend on how the timberland was acquired. This
amount is the original basis and will change as capital improvements are made to the asset,
or as allowances for depletion, amortization, or depreciation are deducted. The amount
remaining in any account after changes have been made is the adjusted basis.
 Timber Accounts
 Assets placed in the timber account can include merchantable timber, young growth or
premerchantable (naturally seeded), and plantation or deferred reforestation (planted or
artificially seeded trees of premerchantable size). Each of these accounts should include the
volume of timber and its dollar value. Timber accounts can be further expanded to include
separate cost bases for specific species, individual tracts, or location on your property. This
may be advantageous if the timber quality and value varies across your property.
 Merchantable timber - is that which can be marketed for utilization in accordance with the
standards of utilization prevailing in the region at the time of the acquisition. The volume is
usually stated in thousand board feet(MBF), or cords. Recovery of your basis in the
merchantable timber is done through depletion if cut by the owner, or by allowable basis if
disposed of on the stump.
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