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Steve Nix

Catastrophic Events, Tree Damage and the IRS

By February 6, 2013

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Timber and tree owners have been hit especially hard the last several years by tornadoes, hurricanes, ice storms and other U.S. disasters.

Remember, trees damaged by fire or storm may entitle the owner to a federal tax deduction in the form of a "casualty loss". This includes losses to both timber and shade trees. You still must attempt to salvage the trees for any remaining value to qualify. A forester can help you with this...

Casualty losses occur when sudden, unexpected and unusual events damage your trees. The first step toward claiming that loss is to document the damage. Take pictures to show the actual property damage before cleanup efforts begin. In most cases you have until April 15, 2010 to report a "casualty loss" of any 2009 damage.

A timber owner has to have made an honest attempt to salvage the damaged timber and accepted any price, even if forced to sell at a lower tree grade. If no buyer can be found, proof of any or all refusals should be documented. So, in theory, if a timber owner has documented the damage and attempted a sale, he/she may deduct all or part of the resulting "loss".

Timber losses may be deducted up to the "adjusted basis" but not on the fair market value. That basis is generally what you originally paid for the timber plus any planting costs. The deduction cannot exceed that adjusted basis. Remember, you should find a registered forester to assess the tree or timber damage.

One cruel fact still remains. The deduction is based, not on timber's fair market value but on your adjusted basis. Many, if not most, owners of timber have a very small basis because the property was purchased decades ago or the timber naturally reseeded or the basis has already been depleted. If your basis is determined to be zero then your loss deduction will be zero. File the deduction on IRS Form 4684, Section B to report the loss.

More on Casualty Loss:

Hurricane Damage - Photo by Philip Wilson


February 15, 2010 at 7:35 am
(1) Tenn Slim says:

NE and NC Arkansas suffered Ice Storm Disaster Jan 27, 09. FEMA and Arkansas declared the areas a disaster for Funds. IRS included areas as “Casulty Loss Areas”. Filing for Losses is indeed a chore. Local Ark Forester is busy doing assessments for LARGE tract. Small Tract owners are shifting for themselves. Your IRS data is timely, accurate and useful.
Key, to me, is the salvage process. I tried to sell cut down debris as Firewood, could not even give it away. Also, the local loggers were busy on LARGE tracts, RR right of ways and local folks close in tree damage. Anyway, selling, giving away, and being accurate in estimating loss damage, via the About.com process for estimating appears to be viable.

January 22, 2012 at 4:58 pm
(2) anypolioncock says:

In my home when I take bored, afterward I just ON my laptop and open YouTube web page to watch the YouTube video tutorials.

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