26 U.S.C. § 194 : US Code - Section 194: Treatment of reforestation expenditures

Search 26 U.S.C. § 194 : US Code - Section 194: Treatment of reforestation expenditures

(a) Allowance of deduction
In the case of any qualified timber property with respect to
which the taxpayer has made (in accordance with regulations
prescribed by the Secretary) an election under this subsection, the
taxpayer shall be entitled to a deduction with respect to the
amortization of the amortizable basis of qualified timber property
based on a period of 84 months. Such amortization deduction shall
be an amount, with respect to each month of such period within the
taxable year, equal to the amortizable basis at the end of such
month divided by the number of months (including the month for
which the deduction is computed) remaining in the period. Such
amortizable basis at the end of the month shall be computed without
regard to the amortization deduction for such month. The 84-month
period shall begin on the first day of the first month of the
second half of the taxable year in which the amortizable basis is
acquired.
(b) Treatment as expenses
(1) Election to treat certain reforestation expenditures as
expenses
(A) In general
In the case of any qualified timber property with respect to
which the taxpayer has made (in accordance with regulations
prescribed by the Secretary) an election under this subsection,
the taxpayer shall treat reforestation expenditures which are
paid or incurred during the taxable year with respect to such
property as an expense which is not chargeable to capital
account. The reforestation expenditures so treated shall be
allowed as a deduction.
(B) Dollar limitation
The aggregate amount of reforestation expenditures which may
be taken into account under subparagraph (A) with respect to
each qualified timber property for any taxable year shall not
exceed -
(i) except as provided in clause (ii) or (iii), $10,000,
(ii) in the case of a separate return by a married
individual (as defined in section 7703), $5,000, and
(iii) in the case of a trust, zero.
(2) Allocation of dollar limit
(A) Controlled group
For purposes of applying the dollar limitation under
paragraph (1)(B) -
(i) all component members of a controlled group shall be
treated as one taxpayer, and
(ii) the Secretary shall, under regulations prescribed by
him, apportion such dollar limitation among the component
members of such controlled group.
For purposes of the preceding sentence, the term "controlled
group" has the meaning assigned to it by section 1563(a),
except that the phrase "more than 50 percent" shall be
substituted for the phrase "at least 80 percent" each place it
appears in section 1563(a)(1).
(B) Partnerships and S corporations
In the case of a partnership, the dollar limitation contained
in paragraph (1)(B) shall apply with respect to the partnership
and with respect to each partner. A similar rule shall apply in
the case of an S corporation and its shareholders.
(c) Definitions and special rule
For purposes of this section -
(1) Qualified timber property
The term "qualified timber property" means a woodlot or other
site located in the United States which will contain trees in
significant commercial quantities and which is held by the
taxpayer for the planting, cultivating, caring for, and cutting
of trees for sale or use in the commercial production of timber
products.
(2) Amortizable basis
The term "amortizable basis" means that portion of the basis of
the qualified timber property attributable to reforestation
expenditures which have not been taken into account under
subsection (b).
(3) Reforestation expenditures
(A) In general
The term "reforestation expenditures" means direct costs
incurred in connection with forestation or reforestation by
planting or artificial or natural seeding, including costs -
(i) for the preparation of the site;
(ii) of seeds or seedlings; and
(iii) for labor and tools, including depreciation of
equipment such as tractors, trucks, tree planters, and
similar machines used in planting or seeding.
(B) Cost-sharing programs
Reforestation expenditures shall not include any expenditures
for which the taxpayer has been reimbursed under any
governmental reforestation cost-sharing program unless the
amounts reimbursed have been included in the gross income of
the taxpayer.
(4) Treatment of trusts and estates
The aggregate amount of reforestation expenditures incurred by
any trust or estate shall be apportioned between the income
beneficiaries and the fiduciary under regulations prescribed by
the Secretary. Any amount so apportioned to a beneficiary shall
be taken into account as expenditures incurred by such
beneficiary in applying this section to such beneficiary.
(5) Application with other deductions
No deduction shall be allowed under any other provision of this
chapter with respect to any expenditure with respect to which a
deduction is allowed or allowable under this section to the
taxpayer.
(d) Life tenant and remainderman
In the case of property held by one person for life with
remainder to another person, the deduction under this section shall
be computed as if the life tenant were the absolute owner of the
property and shall be allowed to the life tenant.