Mon June 18, 2007, 11:21 am

Capital Gains Tax Rate Lowered to 15%

The Jobs and Growth Tax Relief Reconciliation Act of 2003 , was signed by President Bush on May 28, 2003. This bill barely passed the U S Senate by a 51-50 vote, with Vice President Cheney voting to break the tie. The major change affecting timberland owners was the reduction of the Capital Gains Tax Rate beginning in 2003.

The maximum tax rate on net capital gains (including sales of timber or timberland) has been reduced from 20% to 15% (and from 10% to 5% for taxpayers in the 10% and 15% tax rate brackets) for timber or land sold after May 5, 2003.

This reduction brings the Capital Gains Tax Rate to the lowest it has been in over 20 years and offers timberland owners an opportunity to improve the return on their investment. Considering the narrow margin in voting and past history of Capital Gains Legislation, this reduced rate could be short lived. Under the current law, the rate will revert back to 20% in 2009 unless congress votes to extend it. Timberland owners, especially ones with “High Risk” timber, should consider sales to take advantage of the lower tax rates now available.

Reprinted from “Forest Management News” Fall 2003, Volume 23 Number 2, published by Timber Marketing & Management of the Carolinas, Inc.

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