Wednesday, October 19, 2016

Via Upcountry Community Council: Tree Casualty Losses Information

Greetings, you attended the workshop on tree mortality in Amador County. I want to advise you to be sure to keep track of expenses incurred to remove dead trees. I have consulted with some specialists in taxation and these costs constitute casualty losses that can be claimed on your income tax return provided that you meet certain conditions (loss exceeds 10% of AGI Adjusted Gross Income, and exceeds $100).

I have attached an informational paper on tax consequences of insect killed trees (below). Another option to consider, that is more complicated, is to establish the decline in property value associated with the loss of trees. Of course, if you have larger property with extensive mortality that cannot be captured through salvage, that may qualify for a claimed loss as well.

Richard Harris, Ph.D
Registered Professional Forester 1961


The Tax Implications of Insect Damage
Linda Wang, National Timber Tax Specialist, USDA Forest Service

If your timber are damaged or killed by the insects, unless the situation meets the special exceptions, normal level of damage to the timber is generally not tax deductible. Such losses are considered part of the risk and cost for timber property. To be a deductible loss, historically the IRS has allowed tax deductions on insect damages to the trees under special circumstances. Most often, timber property is uninsured or uninsurable, rendering no compensation or reimbursement from the insurance. The loss of ornamental trees on residential property generally is subject to more restrictions than income-producing (business or investment) timber property even if the loss quality for a tax deduction.

Normal level of timber loss from insect damage is not tax deductible.
The economic loss of the timber from the insect damage will be reflected in the decreased value of the timber. That means your profit will be less when you sell your timber down the road and the taxes that are due will also be less.

For example, Mr. Smith owns 40-acre of woodland and intends to produce income from the timber. However, this year, some trees were gradually killed by insects over a period of several months. Because this is considered a normal level of insect infestation, the loss of timber is not tax deductible. Smith worked with a consulting forester who implemented a plan to manage the timber properly. For his tax records, he adjusted the timber volume in his forest management plan, reflecting the loss of timber volume from the insect attack. The dollar amount in his timber basis, however, stayed the same (i.e., it is not changed by the loss of timber volume from the insects). This is because the basis of his timber in his case was the purchase cost he paid for the timber property five years ago. The loss of timber from the insect damage only affects the volume part of the timber basis.

Deductible Loss from “Sudden, Unexpected and Unusual” Insect Damage (Casualty Loss)
The tax law provides a tax deduction for the damage and destruction of property that is caused by a sudden, unexpected or unusual event, that is, the casualty loss deduction. A “sudden” event is one that is swift, not gradual or progressive. An “unexpected” event is one that is not ordinarily anticipated. An “unusual” event is one that is not a day-to-day occurrence and that is not typical activity. For examples, hurricanes and fires are casualty.
Generally, insect damages seldom qualify as casualty loss for tax purpose, because such damages tend to be gradual or progressive over a period of time rather than sudden. So if the insect damage does not meet the swift and sudden requirement, one can’t claim a casualty loss deduction because it is not a casualty.

However, in special cases where the taxpayer was in dispute over whether the timber loss from insect damage qualify for casualty loss, the Tax Court had ruled in favor of the taxpayer.  Specifically, the Tax Court granted casualty loss deduction where the ornamental (“yard”) trees on residential property were killed by the Southern Pine Beetles (SPB). In the Nelson case, the taxpayer owned six acres of residential property in Texas that contained forty-eight loblolly pine trees. Twenty-four trees died within 5 to 10 days of an epidemic attack by SPB. The SPB epidemic was unexpected in the area. The court held that a casualty loss was allowable. Subsequently, the Tax Court again in the Black case determined that the infestation of trees by SPB is a sufficiently sudden event to be a casualty loss when the ornamental trees died within 30 days of attack. In the Smithgall case where the residential owner lost ornamental trees attacked by the epidemic SPB, the District Court in Georgia held that the tree loss was a casualty.   

In light of the court cases, for special situations where ornamental trees were destroyed by onslaught of beetles, the IRS issued guidance that allowed a casualty loss deduction. The death of ornamental trees 5 to 10 days following a massive southern pine beetle attack in an area not known for such massive attacks results in a casualty loss deduction. In other words, the fact that the ornamental trees on the residential property were dead after 5 to 10 days from the attack of the beetles satisfied the suddenness requirement. Also, since there were no known attacks in epidemic proportions of southern pine beetles in the area of the taxpayer’s residence prior and after the tax year, the event was both unusual and unexpected.

Note that even if a casualty loss is allowed, the deduction for the residential yard tree loss is subject to more restrictions than the commercial timber, limiting the amount of the write-off.  Any insurance received reduces the deductible loss. To figure out the amount of casualty loss deduction due to the destruction of ornamental trees by the insects on residential property, the adjusted basis in the property must be established. The calculation of the loss deduction starts with the fair market value loss, subject to the adjusted basis limit. After that, additional deduction limits ($100 floor and 10% rules) apply to personal-use property such as residence.  An appraisal on the value of the entire property before and after the casualty need to be assessed.

To deduct a casualty loss, you must be able to show that there was a casualty and be able to support the amount you take as deduction. 

Casualty loss is reported on Form 4684. The appraisal fees are deductible on Schedule A as miscellaneous expenses subject to 2% adjusted gross income reduction.

Unexpected and unusual damage in a Business
Most insect damages to trees do not result in casualty loss deduction due to the lacking of the element of the suddenness. However, in a special case involving a forest product company’s loss of trees from an unexpected and unusual insect infestation, the IRS allowed a tax deduction (which is termed “noncasualty business loss”). That is, even if a casualty loss has not occurred, a deductible business loss is available for unusual and unexpected insect damage to the timber used in a trade or business. The taxpayer in this case was a corporation that grows, manages, and harvests pine timber for use in its wood products manufacturing facilities. An unexpected and unusual attack on a stand of merchantable pine trees killed the trees. The IRS ruled that the taxpayer’s loss of timber give rise to an allowable business loss deduction when the timber became worthless and bulldozed and burned. Because such loss did not arise from a casualty, it was required to be offsetting capital gains (noncasualty sec. 1231 gains) in most cases. Also, the amount of loss is limited to the adjusted basis in the units that are lost.

In summary, most tree losses from insect damages do not give rise to a tax deduction. Typically such loss of timber from insect infestation do not result in a casualty loss when the damage occurs over a period of time gradually. But the IRS allowed a casualty loss deduction for the death of ornamental trees from an epidemic southern pine beetle attack on residential property. Note that even if the loss to the trees is deductible as casualty loss, the amount of deductions are likely not the fair market value of the timber destroyed due to the basis (usually cost) rule. In another type of special situation, the IRS has allowed noncasualty business tax deduction on timber loss from unexpected and unusual insect attack in a timber trade or business.

Tuesday, October 11, 2016

Former CalFire Deputy Chief Winton and retired AFSC Executive Director Cathy Koos-Breazeal respond to Boitano’s claims regarding the Pine Acres Fuel Break

Recent claims by incumbent District 4 Supervisor Louis Boitano and his supporters regarding the supervisor’s role in the Pine Acres Fuel Break have now been disputed by former CalFire Deputy Chief Lee Winton, a resident of Pine Grove and longtime local CalFire official, and Cathy Koos-Breazeal, a local first responder who recently retired as executive director of the Amador Fire Safe Council.

In a written statement provided to the Frank Axe for District 4 Supervisor campaign today, Chief Winton said the following:
“A year after the Butte Fire, we find ourselves in a political race for the Amador County Board of Supervisors position in District 4. The current supervisor is in a tight race with an individual who is running for the District 4 board position. The incumbent in District 4 has made public claims that he is responsible for the establishment of the fuel break around the Pine Acres sub-division. These claims, or statements, appear to be purely for political gain (i.e. to get re-elected).
“I have personally contacted numerous CAL FIRE chief officers who were in positions of authority, and had direct responsibility, for the planning and implementation of this fuel break system. None of those individuals can recall the direct support or engagement of this supervisor in the process. Certainly, no county resources were ever offered, or used, to create the fuel break.
“My inquiry into this matter did find that a helicopter ride, in a CAL FIRE helicopter, was provided for multiple members of the Amador County board of supervisors as well as members of the Fire Safe Council. This ride occurred during the early stages of the planning process for the fuel break system around Pine Acres as well as an over-view of other Vegetation Management Program projects throughout the county. This was basically a ‘show and tell’ ride to keep the board members and the Fire Safe Council informed about the work being done by CAL FIRE in Amador County.
“I personally have no problem if someone in a political position wants to claim that he or she supported a project that provides for public safety and helps protect lives and property. That is simply part of their responsibility as a public servant. However, do not over-state that fact for what appears to be political gain.”
Amador Pines resident Ms. Koos-Breazeal added:
“The Pine Acres Fuel break was a CalFire and Amador Fire Safe Council project. No county official was involved in designing or developing the fuel break and no county funds were spent to create or maintain the fuel break. For any county official to claim otherwise simply flies in the face of the facts.”
In response, Frank Axe noted, “The risk of wildland fire and increased danger from dying trees is an important issue for Amador County. We need to take real action to protect lives and property. Last week, the county rejected a number of recommendations from the State Board of Forestry and Fire Protections for the county general plan. Those recommendations would have made our communities safer places to live, and I support them.

“I am grateful to have the support of two former, local CalFire chiefs and many others who are familiar with our county’s approach to fire safety and prevention and know what needs to be done in the future.”

For more information, contact Doug Hardy at 209-256-5686.

Amador Community News (ACN) is a non-partisan and politically neutral community news, information and resource site, and does not endorse political parties or candidates.

Monday, October 10, 2016

Hemp is a Resource Whose Time Has Come (Again)

By Ruth Gottstein
(Permission to post, courtesy of Rick Torgerson, Publisher / The Upcountry News, Oct 2016, Vol 15, No. 10)

“Rags, bottle-sacks…rags, bottle-sacks…”

This was a chant from my childhood in San Francisco in the 1930s, which a man in a horse-drawn cart would call out as he made the rounds of our neighborhood. He was an early day recycler…buying, as the chant indicates…rags, bottles and sacks…the latter two items almost said as one…with a cadence and an upward lilt on “sacks” … I can still hear him in my mind, today.

The burlap sacks were made of hemp. Our house on Shrader Street in the Upper Haight-Ashbury, was heated by coal. The coal was delivered in these burlap sacks, so we always had sacks to recycle. In addition to this, another application of burlap was the woven strapping that was used in fine, upholstered furniture. My father and mother owned a furniture manufacturing factory on 16th and Bryant Streets in the Mission district. In those days, sofas and chairs had a layer of cross-thatched hemp straps that supported the cushions. Funny…you don’t see much of that in today’s furniture construction. My parents and their employees made fine furniture for downtown San Francisco department stores like Gump’s and The City of Paris.

All this comes to mind because we have gotten away from using hemp as a natural resource, one that is biodegradable and has multiple use applications. Before I go any further, it is important to distinguish between hemp and marijuana…an association that many of my readers might be tempted to make. Hemp is not marijuana. One of the biggest misconceptions is believing that industrial hemp is the same thing as marijuana. The two plants are from the same species but are more like first cousins and NOT identical twins.

Our oceans have become vast dumping grounds for HUGE quantities of plastic, in fact, floating islands of this debris are well-documented and are an environmental disaster of catastrophic proportions. We need to have a new and fresh look at hemp as an alternative to plastic. The interest today in hemp's usefulness should be praised to the skies--and publicized!
One small example: toilet paper consumption cuts 27,000 trees daily…DAILY!!!(Source:, whereas hemp produces four times the pulp per acre and only takes five months to grow.

The National Hemp Association has long been campaigning in an effort to make hemp fully legal at the Federal level.  Passing the Industrial Hemp Farming Act of 2015, could provide American farmers with an environmentally sustainable cash crop that farmers can easily add into their rotation and serve as an economic driver for rural communities and businesses.
They claim that legalizing hemp will create thousands of jobs in the United States. If you’d like more information on what is happening legislatively, go to their website:

We need to revisit this wonderful, natural alternative to plastic and other synthetic materials. Let’s get back to nature. The sustaining of our planet’s resources should be paramount.

(My last column on the subject of childhood immunizations drew a couple controversial comments…any of which I welcome…so long as the conversation is advanced. Please feel free to contact me directly at