• Home
• Federal Income Taxes
• State Tax Laws
• Estate Planning
• Publications
• Professional Research
  • Master Index
  • Case Law
  • Revenue Rulings
  • Private Letter Rulings
  • Regulations
  • Internal Revenue Code
  • Public Laws
  • Research Process
• Tax Workshops/Education
• Tax Policy
• Links

American Jobs Creation Act of 2004

Estates Qualify for Reforestation Deduction and Amortization, and Trusts Qualify for Amortization

Since the passage of the American Jobs Creation Act of 2004 (P.L. 108-357) there has been confusion over how estates and trusts are treated under Sec. 194 allowing taxpayers to elect to deduct up to $10,000 of qualified reforestation expenses, and amortize qualified expenditures over $10,000. In fact, the 2005 instructions for Schedule F, Form 1040, specifically state that estates do not qualify for the deduction. Technical corrections included in the Gulf Opportunity Zone Act of 2005 [P.L. 109-135, Act Sec. 403(i)(1)] have cleared up the confusion. Estates qualify for the deduction of up to $10,000 of qualified reforestation expenses, and the amortization of amounts over $10,000. As before, trusts do not qualify to expense up to $10,000 of reforestation expenses, however, they do qualify to elect to amortize their total reforestation expenditures. As before, the deduction and amortization are a deduction for businesses, and an adjustment to gross income for investors. Thus, investors benefit even if they don't itemize their deductions.

Gulf Opportunity Zone Act of 2005 also confirms that any amounts deducted as a reforestation expense under IRC Sec. 194 are subject to recapture as ordinary income under the provisions of IRC Sec. 1245(a)(2)(C), as amended. As before, the reforestation amortization deduction remains subject to Sec. 1245 recapture, and the rules for recapture of amortization apply to the reforestation deduction.

The effective date for these provisions is the effective date for the amendments to IRC Sec. 194 by the American Jobs Creation Act of 2004 (P.L. 108-357) --reforestation expenditures after October 22, 2004. Estates and trusts that otherwise qualified, but did not make the Sec. 194 election on their 2004 tax return, may be able to do so on an amended return by applying for administrative relief under the provisions of Reg. §301.9100-3.

(Posted by WLH, 2/2/06)

Domestic Production Activities Deduction - General Overview and Analysis of When Receipts Derived In Whole or In Part From Timber Qualify as Domestic Production Gross Receipts.

The structure of the U.S. tax system is considered by analysts to put U.S. corporations at a competitive disadvantage compared to those in other taxing jurisdictions. Over the years a series of income tax provisions were added and then revoked to level the playing field. These changes were required as part of the various rounds of international trade negotiations. The American Jobs Creation Act of 2004 replaces the extraterritorial income exclusion (ETI) with the Domestic Production Activities Deduction (DPAD), Internal Revenue Code Section 199. This new deduction is easily defined, but the determination of the various components is not. This analysis deals only with how Sec. 199 applies to timber transaction...|continue|

American Jobs Creation Act of 2004

The measure repeals a current export tax break that has been deemed an unfair trade subsidy by the World Trade Organization, as well as modifying a number of timber tax provisions, including Internal Revenue Code Section 631(b) and allowing landowners to expense of reforestation costs in an accelerated fashion...|continue|