On my grandfather's return last year he filed form t(timber). He had
1 sale of timber, $13,000 of timber on his own property, and it has been 7 years since the last sale of timber. In Form t instructions, it states "You are not required to file form t if you have a single sale of timber every 3 to 4 years but you need to keep adequate records." Now this being said, I do not believe he had to file form t and claim the timber as income. If I am correct, how do I go about changing last year's return, or do I need a tax professional to do that? He did have his taxes prepared through H & R Block, but was not happy with his rep. Any advice would be greatly appreciated. I am willing to do the work if a person can amend last year's return without a tax professional.
To change a return for last year, you would file Form 1040X, detailing the sections and line items of the Form to be changed, including an explanation of the reason for the change.
Given the unusual nature of your grandfather's transaction, I visited
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and looked up the Form T Instructions, copied below:___________________________________________________ Form T: Who Must File Complete and attach Form T to your income tax return only if you: *Claim a deduction for depletion of timber, * Elect under section 631(a) to treat the cutting of timber as a sale or exchange, or * Make an outright sale of timber under section 631(b). Complete Form T in accordance with sections 194, 611, 631, and 1231, and the related regulations. Exceptions. You are not required to file Form T if you only have an occasional sale of timber (one or two sales every 3 or 4 years). However, you must maintain adequate records of these transactions and other timber-related activities during the year, as discussed in Recordkeeping, below. These transactions may be treated as an investment for tax purposes if your property is not held for use in a trade or business.
(Part III. Profit or Loss from Land and Timber Sales - Form T Outright sales of timber after December 31, 2004. New rules under section 631(b) allow the landowner to treat outright sales of timber after 2004 as capital gain. The new rules extending capital gains treatment to outright sales of timber are similar to certain disposals of timber under a contract with a retained economic interest. However, for outright sales, the date of disposal is not deemed to be the date timber is cut because the owner may elect to treat the payment date as the date of disposal. For more information, see section 631(b) and Pub.
There is other discussion regarding possible depletion and depretiation deductions, which might apply, depending on the extent of forest management, reforestation activity and other expenses for your grandfather.
It would appear that you might benefit from professional assistance, since the capital gains treatment mentioned above could have reduced income taxes, as well as the possibility of other expenses of depreciation issues.
One session with an Enrolled Agent -- especially one who is well-versed in Timber Sales -- would likely be a wise investment, as it would not only guide you on the Form 1040x particulars, but also might provide better guidance on alternative treatments which could result in capital gains tax treatment or present other options for expensing and/or depreciation.
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