1240.Income from the Sale of Timber

1240.1Is income from the sale of timber included in gross farm income?

Income from the sale of timber is included in gross farm income if:

  1. The timber was grown on the farm;

  2. The income from the timber sales is not treated as a capital gain; and

  3. The timber operation is incidental to or tied in with the operation of the farm so that farming and timber activities constitute one business.

1240.2When is income from the sale of timber excluded from gross farm income?

If you are a farmer who receives substantial income from timber sales and if you have employees who are assigned to work only in timber operations, you generally would be considered to have two businesses: a farm business and a timber business. Income from the timber operations is not considered as farm income but rather is treated as non-farm income for use of the options.