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I have a new client that has 1099-S for sale of stumpage on main property. doing the sched D and 4797. how do i figure cost basis?

 
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Level 15

Argh, Matie! I searched and found the following points of interest:

https://www.extension.purdue.edu/extmedia/FNR/FNR_FAQ_3.pdf  AND  https://www.extension.purdue.edu/extmedia/FNR/FNR_FAQ_2.pdf

ALSO https://www.irs.gov/instructions/it and the related code https://www.law.cornell.edu/uscode/text/26/631

 

“For every tax problem there is a solution which is straightforward,
uncomplicated-and wrong.” — anonymous

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Level 15

If they had a valuation done of the property when it was purchased showing the value of the timber you are in like Flint.  If not, you may have to show zero basis.

Remember - keep 6 feet 3.28 inches away from everyone. I like that extra 3.28 inches - just to be safe.
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Thanks IRonMan...They didn't have the valuation on the timber done...  Most properties in our area of northern MI don't...  But I appreciated the response it was helpful.

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Level 6

Someone else asked that question a few weeks ago and a practitioner who deals a lot with stumpage posted a great answer.  Unfortunately, the Search function here sucks, so you will never find it, unless it only appears on even days and you try again tomorrow.  

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Level 15

This one? https://proconnect.intuit.com/community/proseries-discussions/discussion/sale-of-cut-timber/00/62917

Schedule T did not make it into that conversation and I believe it should have.

https://www.irs.gov/instructions/it

 

“For every tax problem there is a solution which is straightforward,
uncomplicated-and wrong.” — anonymous
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Level 6

No, the one I saw specifically mentioned stumpage, which made me think of Long John Silver.  

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Level 15

Argh, Matie! I searched and found the following points of interest:

https://www.extension.purdue.edu/extmedia/FNR/FNR_FAQ_3.pdf  AND  https://www.extension.purdue.edu/extmedia/FNR/FNR_FAQ_2.pdf

ALSO https://www.irs.gov/instructions/it and the related code https://www.law.cornell.edu/uscode/text/26/631

 

“For every tax problem there is a solution which is straightforward,
uncomplicated-and wrong.” — anonymous

View solution in original post

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Thanks again George4Tacks.  this is pretty much how we solved the issue.  The one thing I found in working this problem out was that stumpage is slightly different from timber in most of the lititure...  anyway the recommendation from Purdue (from your link) was this

Net gain (loss) = sale proceeds -  allowable basis - sale expenses

thanks again for the help

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Thanks George4Tacks.  This was helpful and gave us some areas to discuss with our client.  

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Level 6

@btks    How did you find that?  Have to buy stock in Intuit?