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DP 10: Cost of acquiring timber or right to take timber: other cases
or “How to calculate the cost when buying timber or rights to timber in various situations”
You could also call this:

“How to claim a tax deduction for timber costs when selling timber”

When you make money from selling timber, and this money is considered income under section CB 24 or CB 25, you can get a tax deduction for the costs you had related to the timber. This deduction is given in the tax year when the timber first becomes your trading stock if you harvested it before selling. For other cases, the timing of the deduction is decided by section EA 2.

In this law, ‘timber’ doesn’t just mean trees. It also includes the right to take timber, licences or easements related to timber, and certain forestry rights. However, you can’t get this deduction if the income from selling the timber would be tax-free under section CW 1B, which is about Treaty of Waitangi settlements, except in some special cases.

This deduction is allowed under the general permission rule and is an exception to the capital limitation rule, but other general limitations still apply.

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Next up: DQ 1: Main income equalisation scheme

or “Tax deductions for farmers who save income in a special scheme”
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Part D Deductions
Forestry expenditure

DP 11Cost of timber

  1. This section applies when a person—

  2. derives an amount on the disposal of timber and the amount is income of the person under section CB 24 (Disposal of timber or right to take timber) or CB 25 (Disposal of land with standing timber); and
    1. has incurred expenditure in relation to the timber that is a cost of timber.

      1. The person is allowed a deduction for the amount that is a cost of timber.

      2. The deduction is allocated—

      3. for timber harvested from the land before the time of disposal, to the income year in which the timber first becomes trading stock of the person; or
        1. otherwise, by section EA 2 (Other revenue account property).

          1. In this section, timber includes—

          2. the creation or grant of a right to take timber:
            1. the grant of a licence or an easement in relation to timber:
              1. the creation of a forestry right as defined in section 2 of the Forestry Rights Registration Act 1983, other than a right in favour of the proprietor in relation to establishing, maintaining, and harvesting timber.

                1. Subsection (2) does not apply if the amount of income of the person under section CB 24 would be exempt income under section CW 1B (Treaty of Waitangi claim settlements: rights to take timber) but for section CW 1B(3).

                2. This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.

                Notes
                • Section DP 11: substituted (with effect on 1 April 2008), on , by section 15(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
                • Section DP 11(4B) heading: inserted (with effect on 1 April 2008), on , by section 37 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                • Section DP 11(4B): inserted (with effect on 1 April 2008), on , by section 18(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                • Section DP 11 list of defined terms exempt income: inserted (with effect on 1 April 2008), on , by section 18(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                • Section DP 11 list of defined terms income: inserted (with effect on 1 April 2008), on , by section 18(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).