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Primary Purpose for Holding the Timber

Personal use - Personal use property is that which is held primarily for personal use such as recreation and not primarily for the production of income. This is considered section 1221 property.

Production of income as an investment - Property held primarily for the production of income. Timberland holdings and timber activities may not be extensive enough to constitute a business, but it is still managed for the production of income and not for some other purpose. This is considered section 1221 property.

Use in a trade or business - Property held primarily for the use in a trade or business. A company may hold timber which they cut and process in their own mills or produce logs to be sold to other mills. Rarely is the timber sold on the stump. This is considered section 1231 property.

Primarily for sale to customers in the ordinary course of a trade or business - If instead of cutting timber to process in its own mills, a company grows timber to sell on the stump to other companies it would be holding the timber primarily for sale.