Purpose of Report - Hardwood Timber Industry

This audit technique guide was prepared by a Compliance 2000 Team consisting primarily of individuals from IRS's Examination, Collection, and Criminal Investigation Divisions, and the West Virginia Department of Tax and Revenue (WVDTR). It is based upon information gathered from a sample of examinations and historical data from throughout the nation. Input was also received from many third party sources such as other government agencies, trade associations periodicals, etc.

The primary objective of this effort was to evaluate compliance within the hardwood timber manufacturing process from standing timber through delivery to the final processor and to develop a guide to be used as a reference tool by examiners. Further, this guide provides general and technical information which should be useful to examiners in the classification, pre-planning, and examination of returns in the hardwood timber industry.

The audit areas identified and discussed in this guide were considered to be significant or unusual enough to warrant comment. The mere fact that an item is addressed in this report does not imply that it should be examined in every case. It is intended that the, discussion for any One audit area will assist the examiner in deciding if the item warrants examination on a case by case basis.

TABLE of CONTENTS

Chapter 1 -	Introduction to the Timber industry
Chapter 2 -	Compliance and Audit Issues
Chapter 3 -	Income Taxation of Timber Operations
Chapter 4 -	Basis in Gifts and Inherited Property
Chapter 5 -	Employment Taxes
Chapter 6 -	Excise Taxes
Chapter 7 -	Other considerations
Chapter 8 -	Selected Timber Rulings and Court Cases
Chapter 9 -	Glossary of Timber Terms
Chapter 10 -	Bibliography

EXHIBITS

Exhibit 1 -	National Hardwood Lumber Association General Requirements for Factory Lumber Grades
Exhibit 2 -	Hardwood Lumber Flow Chart
Exhibit 3 -	Timber Sale Agreement
Exhibit 4 -	Timber Sales Agreement - Small Product Sales
Exhibit 5 -	Right - of Way Agreement
Exhibit 6 -	Timber Sale Agreement (for trees at a stump diameter limit at an established price per thousand cut)
Exhibit 7 -	Tables

Market Segment Specialization Program - Hardwood Timber Industry (PDF)