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Timber Sales and Taxes

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From: Greg White
Sesser, IL
Hello, I recently bought some property with approx. 20 acres of timber. I am working with at a consulting forester to establish the tax basis. He would also handle the sale of the timber whenever we get to that point. My question is this, is there a certain amount of time that you need to wait to sell the timber? The forester I'm working with seems to think that if you sell within the first year of owning that the proceeds are taxed as regular income, whereas if we wait a year then it's taxed as a capital gain. Is this true? Thanks, Greg

Extension Message
From: Jay Hayek
Extension Specialist, Forestry
Department of Natural Resources and Environmental Sciences
Greetings Greg:

Yes, you need to be in physical possession of the property for 1 year + 1 day to be eligible for capital gains status via the sale of standing timber. Otherwise, any income you receive will be taxed as ordinary income.

Best, Jay

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