Section 650, Deferred Reforestation Account
Internal Revenue Manual
Specialized Industry Guidelines - Timber
Section 650, Deferred Reforestation Account
Last amended: 6-26-1978
Deferred Reforestation Account
(1) Costs incurred in connection with reforestation constitute capital expenditures.
(2) Reforestation costs include:
(a) Preparation of the site by mechanical or chemical means, often including burning. Depreciation of equipment used for site preparation, transportation, fuel, labor, etc., should also be included.
(b) Cost of seedlings, including the cost of tree improvement programs, operation of seed orchards and tree nurseries if the taxpayer grows his/her own seedlings.
(c) Planting costs including labor and tool expenses, including depreciation of equipment used in planting such as trucks, tree planters, etc.
(d) Other costs of reforestation may include the application of fertilizer, the application of herbicide to kill competing hardwood brush, girdling and poisoning unwanted hardwood trees, etc.
(3) Various reforestation costs may sometimes be found in operating expense accounts with nomenclature that is not usually associated with reforestation activity.
(4) Reforestation costs should be capitalized into a deferred account to be recovered through depletion as the timber becomes merchantable and is cut or sold. See Rev. Rul. 75-467, 1975-2 C.B. 93; Rev. Rul. 71-228, 1971-1 C.B. 53.