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bought 59 acres and was wondering about several things:

1) can I depreciate this land.
2) I pretty sure I can depreciate or expense the improvements. things like seeds, soil, trees, etc...
3) do I add the cost of purchase for the lawyer and closing costs into the cost of the land?
4) I have a 10 year forestry plan cost $475 do I expense this for 10 years or just write it off at one year.

this is a new adventure for us. this is going to be interesting if nothing else.

I have 4 deer on the land. one of my friends said they were dependents. I found that kind of funny but expect the IRA would not be amused.

any publications that would be much help would be appreciated?
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One question comes to mind before yours can be meaningfully answered:

What are you going to do with this land?

--Peter
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but expect the IRA would not be amused.

Okay, having spent most of the day reviewing documents written by non-native English speaking authors, I can't resist.

I don't know about the IRS, but the IRA might consider the deer lunch.
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What are you going to do with this land?
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grow trees, raise swallows, and feed the deer. move there in 3 years or less I hope?
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IRA vs IRS you got me! yes I don't think the IRS would be amused.
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OK - with the additional info that this is going to be personal use property

1) can I depreciate this land.

No. Land cannot be depreciated.

2) I pretty sure I can depreciate or expense the improvements. things like seeds, soil, trees, etc...

Not exactly. They'd get added to the cost of the land. You eventually benefit from these costs when you sell the land.

3) do I add the cost of purchase for the lawyer and closing costs into the cost of the land?

Yes.

4) I have a 10 year forestry plan cost $475 do I expense this for 10 years or just write it off at one year.

Neither. That is another addition to the cost of the land.

any publications that would be much help would be appreciated?

Pub 551 would help with determining your basis in the land.

I have 4 deer on the land. one of my friends said they were dependents.

My standing agreement with clients is that if they can get a social security number for their animal, I'll put 'em on the return as a dependent. ;-)

--Peter
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Perhaps I was a bit hasty.

grow trees,

By grow trees, are you talking about growing trees to eventually be harvested? If so, I think that might be a farming activity. Still can't depreciate the land, but you might be able to allocate some part of the cost to the standing timber. And even that wouldn't be depreciated. It would become essentially inventory. So when you sell the timber for harvest, you'd get to write off that inventory against your timber sale proceeds.

I found a Form T that deals with timber activities. I never knew that existed until now. I do know that there are lots of unique tax issues with growing timber. Unfortunately, I know very little detail about those.

raise swallows, and feed the deer.

Once again, are you raising swallows and deer to be sold in some way? If so, that would definitely be a farming activity. There's lots of good info out there about farms. However, I'm a city boy. I think I've done one or two farm returns in my career. So I'm not a good resource for that info.

--Peter
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I have 4 deer on the land. one of my friends said they were dependents. I found that kind of funny but expect the IRA would not be amused.

Actually, I'm quite amused. The IRS, not so much.

Ira
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Actually, I'm quite amused. The IRS, not so much.

Ira


Does this mean that we should start referring to you as The IRA?
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Once again, are you raising swallows and deer to be sold in some way? If so, that would definitely be a farming activity. There's lots of good info out there about farms. However, I'm a city boy. I think I've done one or two farm returns in my career. So I'm not a good resource for that info.

--Peter
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probably can not deduct the cost of tree swallow housing but would love to collect flying insect control costs? probably another thing the IRS would not be amused about.

as for the deer they will be eating the trees so it might be a contest to see who wins that one. one of the reasons I am planting 900 walnut trees for my first round.

but I think I will be able to deduct the cost of the woolly Adelaide control and the spider mite control. that will be a direct cost.

I do not expect to harvest any trees in my life time. the ones that are there are coming down due to tree barking by the loggers and wind sheer. real bummer. probably why there is only 4 deer on the whole 59 acres. the place I have here has 8 acres and I have 4 deer here.

how about the cost of fencing for the apple trees. that is to deter varmints (deer) from eating the seedlings? or is that land improvement. these can be moved as the tree gets big enough to with stand some trimming by the deer.
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one of the reasons I am planting 900 walnut trees for my first round.

Assuming you eventually plan to harvest the walnut crop, that is definitely a farming activity. Still no depreciation for the land, though. :(

but I think I will be able to deduct the cost of the woolly Adelaide control and the spider mite control. that will be a direct cost.

That's where I run out of farming knowledge. I'm sure they're an expense that you'll need to track. I'm not as sure that you can deduct it immediately for the immature trees. You'd need someone with better farming knowledge than I.

how about the cost of fencing for the apple trees.

Another crop to harvest? If so, that's another expense that I'm sure will benefit you on your taxes, I'm just not sure how. I've always depreciated fences as land improvements, but there may be some special considerations for farming that I don't know off the top of my head.

As long as you're harvesting these tree crops, the trees themselves are also going to help on your taxes, probably through depreciation.

--Peter
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Are you planting the walnuts and apples to later harvest them to sell the fruit and nuts, to sell the timber when mature or because you like them?

I think you need to find an expert. Here's a place to start.


https://www.extension.purdue.edu/extmedia/FNR/FNR-214.pdf

This link was near the end of the pdf.

http://timbertax.org/

My in-laws had a tree farm in CA, but that was in the '80s and I wasn't really involved in it. Theirs was a softwood tree farm. Christmas trees and pine and fir timber. I remember something about trees being long term capital gains when sold...not inventory, but that's about it. Like I said it was awhile ago.

Jean
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One thing I haven't seen mentioned is property taxes. In Idaho, you have two options for property taxes on forested land--pay higher taxes now, or pay lower taxes now and pay some additional when you sell either the land or the timber.

The tax information for forestry stuff is hard to come by. The Form T is a good start, along with Publications 225 (Farmer's Tax Guide) and 535 (Business Expenses). You will need to read very carefully, as much of the information will appear to be contradictory initially.

Also, check with your county extension agent--ours tend to be really good. They might also have access to grant information or tax programs that will pay you to help you get started; to agree not to disturb portions of your land; to fallow your land; to use natural/limited pesticides (like birds :-)); to encourage wildlife; etc. If your state's agricultural department has a website, might be able to find out some stuff there. If you have a land-grant university nearby, the school of agriculture might have some information.

Have fun planting those 900 walnut trees!!!

Kathleen
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The tax information for forestry stuff is hard to come by. The Form T is a good start, along with Publications 225 (Farmer's Tax Guide) and 535 (Business Expenses). You will need to read very carefully, as much of the information will appear to be contradictory initially.
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great stuff thanks.

I bought this land up to speed here I can do it there. just on a bigger scale. actually the whole property would make a great sand and gravel pit. so I have my work cut out for me. there are even unusual places where you can stand on roots of yellow birch that have grown into basket size rocks. under all this you can feel and hear water flowing under that. real cool. makes me sad the loggers cut the trees and left the stumps.
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I think you need to find an expert. Here's a place to start.


https://www.extension.purdue.edu/extmedia/FNR/FNR-214.pdf

This link was near the end of the pdf.

http://timbertax.org/

_____________________________

great stuff thank you.
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My Dad bought 55 acres at auction about a decade ago for $18K.
Not sure how it is being treated for taxes.
We call it "the farm" since it used to be a farm.
It is half wooded and was half open fields.
I helped plant about 4000 trees; Black Walnut, Black Cherry, Red Pine, Cedar, Doug Fir, American Chestnut (experimental). He bought a nice John Deere tractor that he uses to mow the open parts. Probably paid more for the tractor than the land. There is also a "barn".

Separately, he has another 200 acres that were logged a while back, but there are no structures or equipment on that property. With good management, it is possible to harvest trees about every 10-20 years.

Also, at my own home (3 acres) I've planted several hundred trees as well. However, I've made no attempt to gain any federal tax benefit from them. Also own a much smaller John Deere that I use to mow the lawn and trim around some of the trees.

Know a guy at work that was recently audited by the IRS about his hobby farming and Real Estate activities (don't call yourself a real estate agent unless you really are one). However, from talking with real farmers, the bigger issue is property taxes.
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