To view or print the PDF content on this page, download the free Adobe® Acrobat® Reader®.
June 2, 2004
JS-1702
Treasury Clarifies Treatment of Timber Fertilization Costs
Today the Treasury Department and the Internal Revenue Service issued guidance to clarify that costs incurred by a timber grower for post-establishment fertilization of an established timber stand are deductible expenses.
"Whenever possible we should provide guidance on significant issues rather than developing rules through litigation," said Acting Assistant Secretary for Tax Policy Greg Jenner. "Taxpayers have been seeking clarification of this issue for a considerable length of time. The lack of guidance has meant that the issue is often settled on audit by negotiation between the taxpayer and the IRS, which is not an appropriate outcome. After reviewing the applicable statutory provisions and court decisions on similar costs, we concluded that we should issue guidance consistent with those authorities to clarify the treatment of these fertilization costs."
Post-establishment fertilization and other post-establishment practices including fire, disease, insect, and brush control, promote healthy development, maximize timber volume, and are performed for the management, maintenance, and protection of the timber stand. There are no significant differences between the costs for post-establishment fertilization and the costs for other post-establishment practices that have previously been held to be deductible expenses. The guidance issued today therefore concludes that costs for post-establishment fertilization are deductible expenses.
REPORTS