Sub-Section 141, General
Internal Revenue Manual
Specialized Industry Guidelines - Timber
Sub-Section 141, General
Last amended: 6-26-1978
General
(1) The general rules regarding capital expenditures should be applied when determining which expenditures are capital and which are current expenses. The general rules say that expenditures paid or incurred in connection with the timber business must be capitalized if they:
(a) are for the acquisition of property having a useful life of more than one year;
(b) add to the value of property owned by the taxpayer;
(c) prolong the useful life of property owned by the taxpayer; or
(d) adapt property to a new or different use.
(2) Capital expenditures may fall in one of three categories:
(a) those which represent or increase the basis in the timber and are recoverable through allowance for depletion as the timber is cut or as adjusted basis if the timber is sold;
(b) those attributable to depreciable property which may be recovered through allowance for depreciation; and
(c) those representing the cost of land and permanent land improvements that are not subject to depletion or depreciation.