IRS requires forest landowners to track timber basis with per-unit depletion accounting across decades, but most landowners have no records and lose legitimate tax deductions worth thousands

When a forest landowner sells timber, the IRS requires them to calculate 'cost depletion' — recovering the original cost basis of the timber sold by dividing total basis by total volume and multiplying by volume harvested. This requires maintaining detailed records of the original purchase price allocation between land and timber, all capitalized costs (site preparation, planting, herbicide treatments, prescribed burns), updated volume estimates before each sale, and depletion calculations for every partial harvest over a timber rotation that can span 25-60 years. The landowner must file IRS Form T (Forest Activities Schedule) and maintain separate land and timber accounts. Most forest landowners do not do this. If a family bought timberland in 1985 and the children inherit it in 2020, the basis steps up to fair market value at death — but only if someone gets an appraisal. If no appraisal is obtained, the heirs have no documented basis. When they sell timber, they cannot claim depletion, which means they pay ordinary income tax or capital gains tax on the full sale price rather than just the gain. On a $50,000 timber sale with a legitimate basis of $30,000, that is the difference between paying tax on $20,000 versus $50,000. At a 15% capital gains rate, the landowner loses $4,500 in unnecessary taxes on a single sale. Multiply this across the 10 million family forest owners in the U.S. and the aggregate tax overpayment is enormous. The problem persists because timber tax accounting sits in an awkward gap between forestry and accounting expertise. CPAs rarely understand timber depletion, and foresters are not tax professionals. The IRS rules require forestry-specific knowledge (volume estimation, species-level accounting, growth and yield projections) combined with tax-specific knowledge (basis allocation, cost capitalization rules, Section 631 elections). No mainstream tax software handles timber depletion. University extension services publish guides, but they are dense, technical, and assume the landowner already has records stretching back decades. The result is that a perfectly legal and valuable tax benefit goes unclaimed by the vast majority of the people it was designed to help.