I.R.C. § 194(a) Allowance Of Deduction —
In the case of any qualified timber property with respect to which the taxpayer
has made (in accordance with regulations prescribed by the Secretary) an election
under this subsection, the taxpayer shall be entitled to a deduction with respect
to the amortization of the amortizable basis of qualified timber property based on
a period of 84 months. Such amortization deduction shall be an amount, with respect
to each month of such period within the taxable year, equal to the amortizable basis
at the end of such month divided by the number of months (including the month for
which the deduction is computed) remaining in the period. Such amortizable basis
at the end of the month shall be computed without regard to the amortization deduction
for such month. The 84-month period shall begin on the first day of the first month
of the second half of the taxable year in which the amortizable basis is acquired.
I.R.C. § 194(b) Treatment As Expenses
I.R.C. § 194(b)(1) Election To Treat Certain Reforestation Expenditures As Expenses
I.R.C. § 194(b)(1)(A) In General —
In the case of any qualified timber property with respect to which the taxpayer has
made (in accordance with regulations prescribed by the Secretary) an election under
this subsection, the
taxpayer shall treat reforestation expenditures which are paid or incurred during
the taxable year with respect to such property as an expense which is not chargeable
to capital account. The reforestation expenditures so treated shall be allowed as
a deduction.
I.R.C. § 194(b)(1)(B) Dollar Limitation —
The aggregate amount of reforestation expenditures which may be taken into account
under subparagraph (A) with respect to each qualified timber property for any taxable year shall not exceed—
I.R.C. § 194(b)(1)(B)(i) —
except as provided in clause (ii) or (iii), $10,000,
I.R.C. § 194(b)(1)(B)(ii) —
in the case of a separate return by a married individual (as defined in section
7703), $5,000, and
I.R.C. § 194(b)(1)(B)(iii) —
in the case of a trust, zero.
I.R.C. § 194(b)(2) Allocation Of Dollar Limit
I.R.C. § 194(b)(2)(A) Controlled Group —
For purposes of applying the dollar limitation under
paragraph (1)(B)—
I.R.C. § 194(b)(2)(A)(i) —
all component members of a controlled group shall be treated as one taxpayer, and
I.R.C. § 194(b)(2)(A)(ii) —
the Secretary shall, under regulations prescribed by him, apportion such dollar
limitation among the component members of such controlled group.
For purposes of the preceding sentence, the term “controlled group” has the meaning
assigned to it by section 1563(a), except that the phrase
“more than 50 percent” shall be substituted for the phrase “at least 80 percent”
each place it appears in section 1563(a)(1).
I.R.C. § 194(b)(2)(B) Partnerships And S Corporations —
In the case of a partnership, the dollar limitation contained in paragraph (1)(B)
shall apply with respect to the partnership and with respect to each partner. A similar
rule shall apply in the case of an S corporation
and its shareholders.
I.R.C. § 194(c) Definitions And Special Rule —
For purposes of this section—
I.R.C. § 194(c)(1) Qualified Timber Property —
The term “qualified timber property” means a woodlot or other site located in the
United States which will contain trees in significant commercial quantities and which
is held by the taxpayer for the planting, cultivating, caring for, and cutting of
trees for sale or use in the commercial production of timber products.
I.R.C. § 194(c)(2) Amortizable Basis —
The term “amortizable basis” means that portion of the basis of the qualified timber
property attributable to reforestation expenditures which have not been taken into
account under subsection
(b).
I.R.C. § 194(c)(3) Reforestation Expenditures
I.R.C. § 194(c)(3)(A) In General —
The term “reforestation expenditures” means direct costs incurred in connection
with forestation or reforestation by planting or artificial or natural seeding, including
costs—
I.R.C. § 194(c)(3)(A)(i) —
for the preparation of the site;
I.R.C. § 194(c)(3)(A)(ii) —
of seeds or seedlings; and
I.R.C. § 194(c)(3)(A)(iii) —
for labor and tools, including depreciation of equipment such as tractors, trucks,
tree planters, and similar machines used in planting or seeding.
I.R.C. § 194(c)(3)(B) Cost-Sharing Programs —
Reforestation expenditures shall not include any expenditures for which the taxpayer
has been reimbursed under any governmental reforestation cost-sharing program unless
the amounts reimbursed have been included in the gross income of the taxpayer.
I.R.C. § 194(c)(4) Treatment Of Trusts And Estates —
The aggregate amount of reforestation expenditures incurred by any trust or estate
shall be apportioned between the income beneficiaries and the fiduciary under regulations
prescribed by the Secretary. Any amount so apportioned to a beneficiary shall be
taken into account as expenditures incurred by such beneficiary in applying this
section to such beneficiary.
I.R.C. § 194(c)(5) Application With Other Deductions —
No deduction shall be allowed under any other provision of this chapter with respect
to any expenditure with respect to which a deduction is allowed or allowable under
this section to the taxpayer.
I.R.C. § 194(d) Life Tenant And Remainderman —
In the case of property held by one person for life with remainder to another person,
the deduction under this section shall be computed as if the life tenant were the
absolute owner of the property and shall be allowed to the life tenant.
(Added Pub. L. 96-451, title III, 301(a), Oct. 14, 1980, 94 Stat. 1989, and amended Pub. L. 97-354, 3(g), Oct. 19, 1982, 96 Stat. 1689; Pub. L. 99-514, title XIII, 1301(j)(8), Oct. 22, 1986, 100 Stat. 2658; Pub. L. 108-357, title III, Sec. 322, Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, Sec. 403(i)(1), Dec. 21, 2005, 119 Stat. 2577.)
BACKGROUND NOTES
AMENDMENTS
2005-Subsec. (b)(1)(B). Pub. L. 109-135, Sec. 403(i)(1)(A), amended subpar. (B). Before amendment, it read as follows:
“(B) DOLLAR LIMITATION.--
“The aggregate amount of reforestation expenditures which may be taken into account
under subparagraph (A) with respect to each qualified timber property for any taxable
year shall not
exceed $10,000 ($5,000 in the case of a separate return by a married individual (as
defined in section 7703)).”
Subsec. (c)(4). Pub. L. 109-135, Sec. 403(i)(1)(B), amended par. (4). Before amendment, it read as follows:
“(4) TREATMENT OF TRUSTS AND ESTATES.--
“(A) IN GENERAL.--
“Except as provided in subparagraph (B), this section
shall not apply to trusts and estates.
“(B) AMORTIZATION DEDUCTION ALLOWED TO ESTATES.--
“The benefit of the deduction for amortization provided by subsection (a) shall be
allowed to estates in the same manner as in the case of an individual. The allowable
deduction shall be apportioned between the income beneficiary and the fiduciary
under regulations prescribed by the Secretary. Any amount so apportioned to a beneficiary
shall be taken into account for purposes of determining the amount allowable as
a deduction under subsection (a) to such beneficiary.”
2004-Sec. 194. Pub. L. 108-357, Sec. 322(c)(4), amended the heading of Sec. 194 by substituting “Treatment” for “Amortization”.
Subsec. (b). Pub. L. 108-357, Sec. 322(a), amended the material of subsec.
(b) that preceded par. (2). Prior to amendment, it read as follows:
“(b) Limitations
“(1) Maximum dollar amount
“The aggregate amount of amortizable basis acquired during the taxable year which
may be taken into account under subsection
(a) for such taxable year shall not exceed $10,000 ($5,000 in the case of a separate
return by a married individual (as defined in section 7703)).”
Subsec. (b)(2). Pub. L. 108-357, Sec. 322(c)(2), amended par. (2) by substituting
“paragraph (1)(B)” for “paragraph (1)”.
Subsec. (b)(3)-(4). Pub. L. 108-357, Sec. 322(c)(1), struck par. (3) and (4). Before being struck, they read as follows:
“(3) Section not to apply to trusts
“This section shall not apply to trusts.
“(4) Estates
“The benefit of the deduction for amortization provided by this section shall be allowed
to estates in the same manner as in the case of an individual. The allowable deduction
shall be apportioned between the income beneficiary and the fiduciary under regulations
prescribed by the Secretary. Any amount so apportioned to a beneficiary shall be taken
into account for purposes of determining the amount allowable as a deduction under
this section to such beneficiary.”
Subsec. (c)(2). Pub. L. 108-357, Sec. 322(b), amended par. (2) by inserting “which have not been taken into account under subsection
(b)” after “expenditures”.
Subsec. (c)(4)-(5). Pub. L. 108-357, Sec. 322(c)(3), amended subsec. (c) by striking par. (4) and by adding par. (4) and
(5). Prior to being struck, par. (4) read as follows:
“(4) Basis allocation
“If the amount of the amortizable basis acquired during the taxable year of all qualified
timber property with respect to which the taxpayer has made an election under subsection
(a) exceeds the amount of the limitation under subsection (b)(1), the taxpayer shall
allocate that portion of such amortizable basis with respect to which a deduction
is allowable under subsection (a) to each such qualified timber property in such manner
as the Secretary may by regulations prescribe.”
1986--Subsec. (b)(1). Pub. L. 99-514 substituted “section 7703"
for “section 143”.
1982--Subsec. (b)(2)(B). Pub. L. 97-354 substituted “Partnerships and S corporations” for “Partnerships” in heading, and
inserted “A similar rule shall apply in the case of an S corporation and its shareholders.”
EFFECTIVE DATE OF 2005 AMENDMENTS
Amendments by Pub. L. 109-135, Sec. 403(i)(1), applicable as if included in the provisions of the American Jobs Creation Act of
2004 [Pub. L. 108-357, Sec. 322] to which they relate [Effective for expenditures paid or incurred after October
22, 2004].
EFFECTIVE DATE OF 2004 AMENDMENT
Amendments by Pub. L. 108-357, Sec. 322, applicable to expenditures paid or incurred after October 22, 2004.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective Date; Transitional Rules note under section 141 of this
title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-354 applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as an Effective Date note under section 1361 of this title.
EFFECTIVE DATE
Section 301(d) of Pub. L. 96-451 provided that: “The amendments made by this section
[enacting this section and amending sections 62 and 1245 of this title]
shall apply with respect to additions to capital account made after December 31, 1979.”
