- Amortization
- Recovery of capitalized expenses over a short period of time before any sale or property. Reforestation expenses can qualify.
- Basis
- Amount of money invested in a property. Reforestation costs are included in the basis until recovered through amortization or depletion.
- Capital
- expense Amount spent to acquire (or establish) real estate or equipment. Expenses are recorded in an account to be recovered in the future.
- Capitalization
- The process of recording costs in an account so they may be recovered in the future when the property is sold (such as timber) or worn out (such as machinery). Also Capitalized.
- Credit
- A direct deduction of capital expenses against taxes owed. Reforestation expenses can qualify.
- Depletion
- Recovery of capitalized expenses in timber as trees are sold or disposed of.
- Ordinary deductible expense
- Amount spent to manage, protect, or maintain the property. These expenses may be deducted from income the year they occur.
- Pre-merchantable timber account
- An account used to record reforestation expenses and recovery of those expenses separate from any merchantable timber accounts.
- Recovery
- Deduction of capital expenses from gross income to determine taxable or net income. The two methods of recovery for reforestation are Amortization and Depletion.
- Reforestation expense
- Direct costs of establishing timber on your property. The key word establish qualifies reforestation as a capital expense. Expenses may include any or all of the following:
- purchase of seedlings or seeds;
- payment to a vendor to plant seedlings or seeds;
- hiring a contractor to prepare the site for planting;
- purchase of tools and herbicides to prepare the site yourself.
