GFC Reviews Tax Basics of Tree Loss Due to Weather

MARCH 23, 2005--The Georgia Forestry Commission (GFC) has reviewed Internal Revenue Service (IRS) rules and regulations pertaining to weather-related casualty losses experienced by forest landowners.

GFC records show that last year numerous forest landowners experienced tree damage or loss due to storms, hurricanes, and ice. Reporting a casualty loss is a two-step process.  Step one involves before and after casualty value determined by a qualified appraiser. Step two involves salvage of damaged timber.

As a general rule, all losses not compensated for by insurance or otherwise are deductible from income in the year sustained if every reasonable effort is made to salvage affected timber.

Generally, a deduction for a loss to a taxpayer’s single identifiable property is expressed in terms of the number of timber units (tons) but can also be in terms of the managed block (acres) of timber damaged or destroyed. The amount of deductible loss is the lesser of the decrease in the fair market value of the single identifiable property – or the adjusted basis of the single identifiable property. Basis is the cost of establishing the timber stand or the allocated cost of the timber at the time of purchase. If the timber has no basis, there will be no deductible loss.

The process of determining casualty losses from yard trees is more complicated due to the process required by the IRS. The process will usually be worthwhile only for property owners who incurred significant damage and, therefore, large dollar amount losses.

The GFC website has more information on this subject. For further advice on casualty loss and involuntary conversions applicable to forest landowners, GFC recommends that landowners contact a tax professional.