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Income taxes and family forests

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Detroit Lakes,Minnesota 56501
Detroit Lakes Online
Income taxes and family forests
Detroit Lakes Minnesota 511 Washington Avenue 56501

Federal tax law provides tax advantages to family forest owners. These advantages are provided to encourage the growth of private businesses and to maintain an adequate supply of timber from private lands.


To deduct management expenses you must be able to show that you manage your forest for a profit. You may simultaneously manage for wildlife, aesthetics, hunting or other uses. Obtaining the best tax treatment requires good planning, knowledge of the Internal Revenue Code, and good record keeping.

A written forest management plan can provide strong evidence that you are in business. Your goals should be clearly stated in the plan. To illustrate, the IRS audited a Minnesota forestland owner.

One of the documents the landowner showed to the auditor was the forest management plan. The first objective listed was to manage the woodland for harvest of timber and future profit. The auditor was satisfied as to the landowners claim to operate as a business. This was due in large part to the plan's clearly stated objective of conducting timber harvests to make a profit.

While it is not necessary to report income in three out of five years to be in business, it is necessary to show that you have a profit motive. A management plan can serve as one piece of this evidence.

In addition to a clearly stated goal of making a profit from timber harvest, the management plan should include information about the forest and each management unit. This would include timber volume and value, your original land acquisition costs and the basis or original value of all the timber.

In addition, the plan should include management goals for each forest management unit, the estimated costs of management by unit and the expected increase in value of the timber in each unit over time. To document a profit motive the expected value of your forest should exceed the original timber value plus the cost of management.

If you elect to operate as a business, you are not precluded from using your land for recreation or other personal uses. You should be able to show that you will increase the volume and value of the trees on your property and that your management expenses will not exceed the expected increase in value.

Written records are essential to document ownership goals, progress toward goals and the value of the timber. Having a Forest Stewardship Plan that includes detailed information on timber volume, values and how to manage it to produce a profit is the an important step documenting your intention to operate as a business.

For more information on income taxes and family forests, obtain a copy of the Forest Landowners Guide to the Federal Income Tax, visit and consult with your accountant.

For more information on obtaining a free Forest Stewardship Plan contact your local Minnesota Department of Natural Resources Forestry Office, your local Soil and Water Conservation District Office or a forestry consultant through the Minnesota Association of Consulting Foresters.

The above information on income taxes and family forests is the viewpoint of Mike Reichenbach, University of Minnesota Extension Educator and Society of American Foresters Certified Forester.

How long can crops tolerate flooding?

The severity of crop damage from flooding and ponding depends on the depth of the water, the length of time flooded and the temperature of the floodwater. Depth of flooding refers to the visible water above ground and moisture in the soil profile. With the flat topography of the valley, many fields already are trenched, and more recently tiled, to facilitate drainage. Even after surface water has receded, the soil may remain saturated for some time. While the shoot may appear healthy, the roots may be suffocating.

The length of time a field is flooded affects the rate of plant survival. Corn or soybeans usually can survive two to four days of ponding, depending on the temperature. If the air temperature is over 77 degrees Fahrenheit, plants may not survive longer than 24 hours.

Spring flooding is a lot less harmful than later flooding, when the floodwaters are apt to be warm. The temperature of the floodwater is important for two reasons: there is less oxygen available in warm water than in cool water; and microorganisms that use oxygen are more active in warm water. The microorganisms compete with roots for oxygen.

After using the oxygen, microorganisms will begin to break down nitrate nitrogen, converting it to a gas through denitrification, and also during flooding, nitrogen also can be lost through leaching.

Even if flooding doesn't kill plants outright, it may have a long-term negative impact on crop performance and the potential for disease development. As a result, plants may be subject to greater injury during a dry summer because root systems are not sufficiently developed to access available subsoil water.

Indirect effects of flooding on soybeans include 1) root diseases, 2) nitrogen deficiency, 3) and other plant nutrient imbalances. In cereals, water-logging reduces tillering, leaf elongation, kernel number, and, ultimately, final yield.

In rowed crops, cultivation should be considered to increase soil aeration. Post- emergence herbicides to conventional soybean should only be applied to crops judiciously. Herbicide stress should be minimized and postponed where possible.

Producers may want to carefully weigh the costs and benefits of further inputs into some badly damaged fields. To confirm plant survival, check the color of the growing point. It should be white and cream colored rather than dark and soft. New leaf growth should appear three to five days after water drains from the field.

Replanting may not be a very viable option in many fields where conditions are likely to stay soggy for several weeks, not allowing for timely fieldwork and planting.