
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC194]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 194. Amortization of reforestation expenditures


(a) Allowance of deduction

    In the case of any qualified timber property with respect to which 
the taxpayer has made (in accordance with regulations prescribed by the 
Secretary) an election under this subsection, the taxpayer shall be 
entitled to a deduction with respect to the amortization of the 
amortizable basis of qualified timber property based on a period of 84 
months. Such amortization deduction shall be an amount, with respect to 
each month of such period within the taxable year, equal to the 
amortizable basis at the end of such month divided by the number of 
months (including the month for which the deduction is computed) 
remaining in the period. Such amortizable basis at the end of the month 
shall be computed without regard to the amortization deduction for such 
month. The 84-month period shall begin on the first day of the first 
month of the second half of the taxable year in which the amortizable 
basis is acquired.

(b) Limitations

                      (1) Maximum dollar amount

        The aggregate amount of amortizable basis acquired during the 
    taxable year which may be taken into account under subsection (a) 
    for such taxable year shall not exceed $10,000 ($5,000 in the case 
    of a separate return by a married individual (as defined in section 
    7703)).

                   (2) Allocation of dollar limit

        (A) Controlled group

            For purposes of applying the dollar limitation under 
        paragraph (1)--
                (i) all component members of a controlled group shall be 
            treated as one taxpayer, and
                (ii) the Secretary shall, under regulations prescribed 
            by him, apportion such dollar limitation among the component 
            members of such controlled group.

        For purposes of the preceding sentence, the term ``controlled 
        group'' has the meaning assigned to it by section 1563(a), 
        except that the phrase ``more than 50 percent'' shall be 
        substituted for the phrase ``at least 80 percent'' each place it 
        appears in section 1563(a)(1).

        (B) Partnerships and S corporations

            In the case of a partnership, the dollar limitation 
        contained in paragraph (1) shall apply with respect to the 
        partnership and with respect to each partner. A similar rule 
        shall apply in the case of an S corporation and its 
        shareholders.

                 (3) Section not to apply to trusts

        This section shall not apply to trusts.

                             (4) Estates

        The benefit of the deduction for amortization provided by this 
    section shall be allowed to estates in the same manner as in the 
    case of an individual. The allowable deduction shall be apportioned 
    between the income beneficiary and the fiduciary under regulations 
    prescribed by the Secretary. Any amount so apportioned to a 
    beneficiary shall be taken into account for purposes of determining 
    the amount allowable as a deduction under this section to such 
    beneficiary.

(c) Definitions and special rule

    For purposes of this section--

                    (1) Qualified timber property

        The term ``qualified timber property'' means a woodlot or other 
    site located in the United States which will contain trees in 
    significant commercial quantities and which is held by the taxpayer 
    for the planting, cultivating, caring for, and cutting of trees for 
    sale or use in the commercial production of timber products.

                        (2) Amortizable basis

        The term ``amortizable basis'' means that portion of the basis 
    of the qualified timber property attributable to reforestation 
    expenditures.

                   (3) Reforestation expenditures

        (A) In general

            The term ``reforestation expenditures'' means direct costs 
        incurred in connection with forestation or reforestation by 
        planting or artificial or natural seeding, including costs--
                (i) for the preparation of the site;
                (ii) of seeds or seedlings; and
                (iii) for labor and tools, including depreciation of 
            equipment such as tractors, trucks, tree planters, and 
            similar machines used in planting or seeding.

        (B) Cost-sharing programs

            Reforestation expenditures shall not include any 
        expenditures for which the taxpayer has been reimbursed under 
        any governmental reforestation cost-sharing program unless the 
        amounts reimbursed have been included in the gross income of the 
        taxpayer.

                        (4) Basis allocation

        If the amount of the amortizable basis acquired during the 
    taxable year of all qualified timber property with respect to which 
    the taxpayer has made an election under subsection (a) exceeds the 
    amount of the limitation under subsection (b)(1), the taxpayer shall 
    allocate that portion of such amortizable basis with respect to 
    which a deduction is allowable under subsection (a) to each such 
    qualified timber property in such manner as the Secretary may by 
    regulations prescribe.

(d) Life tenant and remainderman

    In the case of property held by one person for life with remainder 
to another person, the deduction under this section shall be computed as 
if the life tenant were the absolute owner of the property and shall be 
allowed to the life tenant.

(Added Pub. L. 96-451, title III, Sec. 301(a), Oct. 14, 1980, 94 Stat. 
1989; amended Pub. L. 97-354, Sec. 3(g), Oct. 19, 1982, 96 Stat. 1689; 
Pub. L. 99-514, title XIII, Sec. 1301(j)(8), Oct. 22, 1986, 100 Stat. 
2658.)


                            Prior Provisions

    A prior section 194 was renumbered section 194A of this title.


                               Amendments

    1986--Subsec. (b)(1). Pub. L. 99-514 substituted ``section 7703'' 
for ``section 143''.
    1982--Subsec. (b)(2)(B). Pub. L. 97-354 substituted ``Partnerships 
and S corporations'' for ``Partnerships'' in heading, and inserted ``A 
similar rule shall apply in the case of an S corporation and its 
shareholders.''


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable to bonds issued after Aug. 
15, 1986, except as otherwise provided, see sections 1311 to 1318 of 
Pub. L. 99-514, set out as an Effective Date; Transitional Rules note 
under section 141 of this title.


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-354 applicable to taxable years beginning 
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as an 
Effective Date note under section 1361 of this title.


                             Effective Date

    Section 301(d) of Pub. L. 96-451 provided that: ``The amendments 
made by this section [enacting this section and amending sections 62 and 
1245 of this title] shall apply with respect to additions to capital 
account made after December 31, 1979.''

                  Section Referred to in Other Sections

    This section is referred to in sections 48, 62, 1245 of this title.
