Revenue Ruling 75-467, 1975-2 CB 93
REV-RUL, Capital expenditures; in general., Rev. Rul. 75-467, 1975-2 CB 93, (Jan. 01, 1975)
Section 263.--Capital Expenditures
26 CFR 1.263(a)-1: Capital expenditures; in general.
(Also Sections 611, 1011; 1.611-3, 1.1011-1.)
Generally, direct costs incurred in connection with reforestation by planting and artificial or natural seeding are capital expenditures, recoverable through the allowance for depletion when the timber is cut, or as adjusted basis if the timber is sold. See section 1.611-3(a) and section 1.1011-1 of the Income Tax Regulations.
Such planting or seeding costs include:
(a) preparation of the site, including any girdling, herbicide applications, baiting of rodents, or brush removal work to afford good growing conditions;
(b) cost of seed or seedlings; and
(c) labor and tool expense, including depreciation of equipment such as tractors, trucks, tree planters and similar machines used in planting or seeding.
Indirect expenditures, such as interest paid on money borrowed to satisfy a state law requiring a deposit to guarantee natural reforestation over a specified period of years in lieu of planting, or a service charge on a performance bond in lieu of a cash deposit, may be treated as current deductions for the year in which incurred or capitalized cumulatively in accordance with a proper election by the taxpayer under the provisions of section 266 of the Internal Revenue Code of 1954.
Rev. Rul. 55-252, 1955-1 C.B. 319, is hereby superseded, since the position stated therein is set forth under the current statute and regulations in this Revenue Ruling.