CONSERVATION CORNER
Hurricane Shade Tree Destruction May Be Tax Deductible
by James L. Cummins

According to the Internal Revenue Service, taxpayers may be able to deduct losses in property value from Hurricane Katrina. This includes damage to shade trees along with damage to your home and automobiles that will not be reimbursed through insurance payments. Deductible casualty losses are a result of storms, fire and theft.

Losses up to the adjusted basis of the property may be deducted. Basis is the book value of your investment in an asset and depends on how the property was acquired and if money was invested or recovered after acquisition. Most homeowners have a fairly large basis. If you bought your home, initial basis is equal to the total cost of purchasing your home. Inherited homes have a basis of fair market value at the time of the donor's death. If significant capital improvements were made to the home after acquisition, the basis is adjusted by adding the amount of investment. The method to estimate the value loss in shade trees is the "Cost of Cure". This is the only method allowed by the Internal Revenue Service. This method is published in the "Guide for Plant Appraisal" (9th Edition) by the International Society of Arboriculture. Essentially the "Cost of Cure" method allows you to deduct the cost of restoring your property back to pre casualty conditions.

The "Cost of Cure" loss includes: (1) clean up costs, including debris and stump removal; (2) repair and restoration of trees still worth saving; (3) installation and purchase of same size or largest possible replacement trees; and (4) post-restoration maintenance during the years it takes to get trees back to original condition. A certified arborist or qualified landscape appraiser must help you make the estimate of loss. To find a certified arborist nearby, go to the International Society of Arboriculture website at www.isa arbor.com. You can also contact your local Mississippi Forestry Commission for help in finding an arborist. The Commission's Urban Forester is available at (601) 359 1386.

The question that remains is: "Is there enough loss to justify hiring an appraiser?” For shade trees on personal property a loss would have to be greater than $100 plus 10 percent of the taxpayer's adjusted gross income (as reported on IRS Form 1040). Shade tree loss alone may not be enough if you have high income. Home, car and other damage not covered by insurance may need to be grouped together to justify a shade tree loss appraisal. Casualty losses on personal property are reported on IRS Form 4684. For income on rental property, the loss is deductible up to the basis regardless of the owner's income.

Several IRS publications may help the individual claiming a loss from a casualty. Publication 2194 2004 "Disaster Losses Kit" or Publication 584 "Casualty, Disaster and Theft Loss Workbook" may be downloaded from the IRS website: www.irs.gov or obtained by calling 1 800 829 3676. Information specific to timber tax issues may be obtained from the MSU Cares website using the forestry link, or from www.timbertax.org.