D24—Lancaster Farming, Saturday, November 17,1984
Tax reform affects timber
NEWARK, Del. —Several
provisions of the 1984 Tax Reform
Act affect timber owners and
operators. According to University
of Delaware extension farm
management specialist Don
Tilmon, the most significant
change is probably the one which
reduces the holding period for
long-term capital gains from one
year to six months, with the ex
ception of timber disposals under
Section 631 (a) of the Internal
Revenue Code.
The new holding period applies
to assets acquired after June 22,
1984, and before Jan. 1, 1988. It
applies to all capital assets, in
cluding timber held for investment
and timber sold (under Section
631) with an economic interest
retained. A special holding period
applies to timber whose owners
elect to treat cutting as a
sale-that is, timber sold under
Sesction63l (a).
The Tax Reform Act of 1984
provides that for 631 (a) tran
sactions timber or a contract
nght-to-cut must be held “on the
first day of such year and for a
period of more than six months
before such cutting.” (The Code
used to read, “for a period of more
than one year.”) According to
Tilmon, the effect of the new
wording is that the holding period
could be as short as six months if
631 (a) timber were held on the
first day of the tax year, or as long
as one year, if the timber were
acquired on the second day of the
tax year.
Since small timber owners may
sell timber only occasionally, in
the past they may have able to take
advantage of income averaging
provisions to reduce the tax on a
large timber income in one year.
The rules for income averaging
have been tightened. For com
putation years beginning after
1983, Tilmon says it is now
necessary for income in the tax
owners
year to be 140 percent of the
average income in the previous
three tax years m order to use
income averaging.
Before the 1984 Tax Reform Act,
income in the tax year had to be
only 120 percent greater than that
in the previous four years. The
change applies to tax years
beginning after December 31,1983.
“Timber owners who cannot
qualify for income averagmg
might consider selling their timber
in two or more tax years,” the
farm management specialist says.
Another change in the 1984 act
affects taxpayers who were
planning to take the option of
treating an investment in
qualifying property as an expense
under Code Section 179, rather
than as a capital investment. The
upper limit on the amount that
could be treated as an expense was
$5,000, but the limit was due to be
8.5%
Annual Percentage Hate
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The storm will pass. And thankfully, so
will you with a Kubota snowblower.
We have snowblowers that attach to most
Kubota diesel tractors, and they are a cinch
to operate. They clear snow from driveways,
roads or parking lots. Break up and clear
heavy drifts. And the large diameter chutes
give you excellent control of casting
distance.
AiHI J&CwHT JEMbBnXCS Im ScOCft
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730 South Broad St.
Lititz, Pa. 17343
on Route 501
6 miles North
of Lancaster
Lancaster County
717-626-2121
DASHING
THROUGH
0
TWO CONVENIENT LOCATIONS:
PARTS * SALES ★ SERVICE NEW TOLL FREE NO.
1-800-822-2152
increased to $7,500 for 1984. In
stead, the Tax Reform Act
lengthened the period for the upper
$5,000 limit through tax years
beginning in 1987. The upper limit
is now scheduled to be $7,500 for
tax years beginning in 1988 amd
1989, and $lO,OOO for tax years
beginning in 1990 or thereafter
Del. making
DOVER, Del. - Beginning Nov.
13, the Delaware Department of
Agriculture, Forestry Section and
the Department of Administrative
Services, Division of Facilities
Management, Energy Office
launched a telephone survey of
Delaware residents to t determine
the amount of firewood burned
throughout the state. The calls will
be made between 6 and 9 p.m. on
selected evenings (primarily
Monday through Thursday) in
THE LOWEST TRACTOR
FINANCING YOU CAN
DIG UP ANYWHERE.
So next time the forecast calls for snow,
relax. It’ll blow over. With a little help from
Kubota.
UKUBOIII'
Nothing like it on earth"
Other changes m the act affect
estate and gift taxes. Before its
adoption, the maximum estate and
gift tax rate was scheduled to drop
50 percent for estates of those who
died after 1984 or for gifts made
after that date. The act freezes the
1984 rate of 55 percent through
1987.
wood survey
November. The survey is funded
through a grant from the Coalition
of Northeastern Governors, under
the Northeastern Regional
Biomass Project.
The cooperation of Delaware
residents in this effort will be
greatly appreciated.
Anyone with questions con
cerning the survey should contact
Nancy Milhken of the Delaware
Department of Agriculture at 736-
4811 (8-4:30 Monday through
Friday).
o
R. 7 Lebanon,
Pa. 17042
Rt. 4191 mile West
of Schaefferstown,
Buffalo Springs
Lebanon County
717-949-6501