Fortunately, Georgia has wonderful re-forestation and timber conservation plans and there are plenty of income producing and investment motivated tree-farms all over the southeast.  Timber farming can be investment intensive, tax sensitive, and cause real challenges to cash flow management.  Proper planning and reasoned anticipation of capital demands is crucial to a successful timber farming operation.  Some of the more common issues for the small and medium sized timber farmer may include:

• Timber depletion.  Internal revenue code section 611(a) requires the cost depletion method be used for recognizing timber depletion.  This requires careful cost basis determinations, which can be greatly impacted by interim plantings and timber maturities.
  
• Equipment purchases.  There are substantial opportunities to manage your cash flow and tax exposures based on the timing and manner in which you purchase the significant equipment needed to maintain a timber farm.  You may be able to benefit from special depreciation for single-purpse agricultural and horticultural structures.
  
• Income recognition.  Do you sell your timber to a customber base in the form of logs, firewood, or pulpwood, or, do you sell it as standing timber?  These decisions require critical planning and can greatly impact your tax exposure and the rates of tax you pay.
  
• Cruises and basis calculations.  How do you determine the basis of the land as distinguished from its standing timber?  What choices do you have in making those decisions?  Is it absolutely necessary to have a timber cruise performed?  Careful attention to these details and events should be considered at the time of any land purchase with signficant standing timber.

There are many unique issues that should be included in any timber-based tax planning scenario.  Let us help you manage the financial success of your timber farm through minimization of taxes paid and maximization of cash flow.