Reforestation Costs You can choose to amortize part of your qualified timber propertyreforestation costs. These are the direct costs of planting or seedingfor forestation or reforestation. Qualifying costs.Qualifying costs include only those costs you must capitalize andinclude in the adjusted basis of the property. They include costs forthe following items. Site preparation. Seeds or seedlings. Labor. Tools. Depreciation on equipment used in planting andseeding. cheap hotels in StavangerCosts you can deduct currently are not qualifying costs. If the government reimburses you for reforestation costs under acost-sharing program, you can amortize these costs only if you includethe reimbursement in your income. Qualified timber property.Qualified timber property can be a woodlot or other site that youown or lease. The property qualifies only if it meets all of thefollowing requirements. It is located in the United States. It is held for the growing and cutting of timber you willeither use in, or sell for use in, the commercial production of timberproducts. It consists of at least one acre planted with tree seedlingsin the manner normally used in forestation or reforestation. Qualified timber property does not include property on which youhave planted shelter belts or ornamental trees, such as Christmastrees. Annual limit.Each year, you can choose to amortize up to $10,000 of qualifiedcosts you pay or incur during the tax year. If you are married andfile a separate return, the annual limit is $5,000. You cannot carryover or carry back qualifying costs over the annual limit. The annuallimit applies to costs you pay or incur during a tax year on all ofyour qualified timber property. If you pay or incur more than $10,000 in costs for more than onepiece of timber property, you can divide the annual limit among any ofthe properties in any manner you wish. For example, if you incurred $10,000 of qualifying costs on each offour qualified timber properties last year, you can divide $2,500 toeach property, $5,000 to two properties, the entire $10,000 to any oneproperty, or you can divide the $10,000 among some or all of theproperties in any other manner. Partnerships and S corporations.The $10,000 annual limit applies to a partnership or an Scorporation and to each partner or shareholder. A partnership or Scorporation makes the choice to amortize its qualified costs andallocates the costs (limited to $10,000) among the partners orshareholders. A partner or shareholder is also subject to the annual limit of$10,000 ($5,000, if married and filing a separate return) regardlessof the source of the costs. For example, if you are a partner in twoor more partnerships that choose to amortize qualified costs, yourtotal share of partnership amortizable basis cannot be more than$10,000 on a joint return ($5,000 if married and filing a separatereturn). Amortizable basis is the part of the basis ofqualified property that is from reforestation costs. Estates.Estates can choose to amortize up to $10,000 of qualifiedreforestation costs paid or incurred in each tax year. Any amortizablebasis acquired by an estate is divided between the estate and theincome beneficiary based on the income of the estate allocable toeach. The amortizable basis distributed from an estate to abeneficiary is taken into account in determining the beneficiary'sannual limit. Life tenant and remainderman.If one person holds the property for life with the remainder goingto another person, the life tenant is entitled to the fullamortization (up to the annual limit) for reforestation costs made bythe life tenant. Any remainder interest in the property is ignored foramortization purposes. Amortization period.You can amortize qualified reforestation costs over a period of 84months. The 84-month period starts on the first day of the first monthof the second half of the tax year you incur the costs (July 1st for acalendar year taxpayer). You can claim amortization deductions for nomore than 6 months of the first and last (eighth) tax years of theperiod. Example.Last year (a full 12-month tax year), John Jones incurred qualifiedreforestation costs of $8,400. His monthly deduction ($100) is figuredby dividing $8,400 by 84 months. Since it was the first year of the84-month period, he can deduct only $600 ($100 6 months). Maximum annual amortization.The maximum annual amortization deduction for costs incurred in anytaxable year is $1,428.57 ($10,000 7). The maximum deductionin the first and last tax year of the 84-month amortization period isone half of $1,428.57 or $714.29. Recapture.If you dispose of qualified timber property within 10 years afterthe tax year you create an amortizable basis in the property, reportany gain as ordinary income up to the amount of the amortization youtook. Investment credit.Reforestation costs eligible to be amortized qualify for theinvestment credit, whether or not they are amortized. See theinstructions for Form 3468 for information on the investment credit. How to make the choice.To choose to amortize qualified reforestation costs, enter yourdeduction in Part VI of Form 4562 and attach a statement that containsthe following information. A description of the costs and the dates you incurredthem. A description of the type of timber being grown and thepurpose for which it is grown. Attach a separate statement for each property for which youamortize reforestation costs. Generally, you must make the choice on atimely filed return (including extensions) for the tax year in whichyou incurred the costs. However, if you timely filed your return forthe year without making the choice, you can still make the choice byfiling an amended return within 6 months of the due date of the return(excluding extensions). Attach Form 4562 and the statement to theamended return and write "Filed pursuant to section 301.9100-2"on Form 4562. File the amended return at the same address you filedthe original return. Where to report.If you file Schedule C or F (Form 1040) for the activity in whichyou incurred reforestation costs, include your amortization deductionon the line for "Other Expenses." If you do not file Schedule Cor F, include your amortization deduction in the total on line 32 ofForm 1040. Enter the amount and "RFST" (for reforestation) on thedotted line next to line 32. Envelope: Revocation.You must get IRS approval to revoke yourchoice to amortize reforestation costs. Your application to revoke thechoice must include your name, address, the years for which yourchoice was in effect, and your reason for revoking it. You, or yourduly authorized representative, must sign the application and file itat least 90 days before the due date (without extensions) for filingyour income tax return for the first tax year for which your choice isto end. Send the application to: Commissioner of Internal Revenue Washington, DC 20224