Hardwood Timber Industry Guide Name Audit Technique Guide›Audit Technique Guide Subtitle
Table of Contents
0725 Publ 6116 (PDF) · 2026-10-03 edition · updated 2026-10-04 · United States
I. Overview of the Timber Industry ........................................................................... 5
A. Purpose of the Audit Technique Guide .......................................................... 5
B. Differences between Softwood and Hardwood Regions .............................. 5
C. Hardwood Products and By-Products ............................................................ 6
D. Vertical Integration of the Hardwood Timber Industry .................................. 7
II. Records and Examination Techniques ................................................................. 9
A. Timber Records - Form T (Timber) Forest Activities Schedule .................... 9
A.1. Part I – Acquisitions .............................................................................. 10
A.2. Part II - Timber Depletion ...................................................................... 10
A.3. Part III - Profit or Loss from Land and Timber Sales .......................... 11
A.4. Example 1 ............................................................................................... 12
A.5. Part IV - Reforestation and Timber Stand Activities ........................... 12
A.6. Part V - Land Ownership ....................................................................... 13
B. Examination Techniques ............................................................................... 13
B.1. Landowner: ............................................................................................ 13
B.2. Logger: ................................................................................................... 15
B.3. Trucker: .................................................................................................. 15
B.4. Sawmill: .................................................................................................. 16
III. Income Taxation of Timber Operations .............................................................. 19
A. Timber Income ................................................................................................ 19
B. Timber Expenses ............................................................................................ 20
C. Capital Expenditures ...................................................................................... 21
C.1. The Land Account.................................................................................. 21
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C.2. The Timber Account .............................................................................. 22
C.3. The Plantation Sub-Account ................................................................. 23
C.4. The Equipment Account ........................................................................ 23
D. Operating Expenses ....................................................................................... 23
E. Selling Expenses ............................................................................................ 24
F. Establishing Cost or Basis ............................................................................ 25
F.1.Example 1 ........................................................................................................ 27
F.2.Example 2 ........................................................................................................ 29
F.3.Example 3 ........................................................................................................ 29
F.4.Example 4 ........................................................................................................ 31
IV. Basis in Gifts and Inherited Property .................................................................. 34
V. Employment Taxes ............................................................................................... 34
A. Overview ......................................................................................................... 34
VI. Excise Taxes ......................................................................................................... 34
A. Overview ......................................................................................................... 34
B. Recordkeeping Requirements for Vehicles ................................................. 35
C. Computation - Excise Tax .............................................................................. 36
C.1. Reduction in Tax for Trucks Used in Logging .................................... 36
C.2. Filing Form 2290 .................................................................................... 36
D. Fuel Tax Credits and Refunds ....................................................................... 37
D.1. Recordkeeping Requirements for Fuel Tax Credit and Refunds ....... 37
D.2. Claiming the Credit or Refund .............................................................. 38
E. Examination Issues ........................................................................................ 38
VII. Other Tax Considerations .................................................................................... 39
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A. Reforestation .................................................................................................. 39
B. Forestry Incentive Cost-Share Payments ..................................................... 39
C. Form 1099-S Required For Lump-Sum Timber Sales .................................. 40
D. Christmas Trees ............................................................................................. 40
E. Use of Specialty Groups ................................................................................ 40
E.1.Engineering ..................................................................................................... 40
E.2.Computer Audit Specialist (CAS) .................................................................. 41
E.3.International Cross Borders Examiner ......................................................... 41
E.4.Employment Tax Specialists ......................................................................... 41
F. Penalties .......................................................................................................... 41
VIII.References for Federal Timber Tax ..................................................................... 41
A. Code and Regulations .................................................................................... 41
B. Revenue Rulings, Court Cases ..................................................................... 42
C. Timber Forms ................................................................................................. 42
D. Other Sources of information ........................................................................ 43
IX. Glossary ................................................................................................................ 43
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