Publications > Internal Revenue Service > Market Segment Specialization Program > Hardwood Timber Industry
Exhibit 7
Table 1. Calculating basis in the timber account
| Quantity (MBF) | Cost or Basis | |
| Estimated quantity (Purchased Year 0) | 200 | $10,000.00 |
| Growth (10 years) | 45 | |
| Timber acquired (Purchased Year 5) | 50 | $3,750.00 |
| Growth (5 years) | 5 | |
| Total (Year 10) | 300 | $13,750.00 |
| Reductions (sales) | ||
| Net quantity and value (December, Year 10) | 300 | $13,750.00 |
Basis (December, Year 10) = $13,750.00
Depletion unit rate = $13,750.00/300 MBF; = $45.83/MBF
Table 2: Determining gain or loss on a sale of timber
| Quantity (MBF) | Cost or Basis | |
| Estimated quantity (December, Year 10) | 300 | $13,750.00 |
| Growth (Year 11) | 10 | |
| Total before depletion (December, Year 11) | 310 | $13,750.00 |
| Unit rate | 44.35 | |
| Quantity sold (Fall, Year 11) | 100 | |
| Allowable basis of sale | $4,435.00 | |
| Reductions (sales) | 100 | $4,435.00 |
| New quantity and value | 210 | $9,315.00 |
(December, Year 11)
Gross Receipts $20,000.00
Adjusted basis -4,435.00
Sale expense (consultant) -3,000.00
Sale expense (seller) - 500.00
Profit $12,065.00