Capital Gains Treatment for Income from Qualified Timber

Individual owners, as opposed to companies, are allowed to treat income from dispositions of timber held for more than one year before disposal as a capital gain, rather than ordinary income, thus allowing them to be taxed at a lower rate. Income from cutting timber which has been owned, or the right to cut which has been owned for more than one year also qualifies as a capital gain. The current maximum applicable capital gains rate is 20 percent, compared to the top individual tax rate of 37 percent. Capital gains treatment of income from cutting timber was added in the Revenue Act of 1943.