Buying land in Northern Wisconsin is more than just a
lifestyle decision - it’s a long-term investment. According to Matt Schultz of United
Country Northern Wisconsin Lifestyle Properties, there’s one mistake new
landowners make far too often, and it can cost them thousands of dollars in
avoidable taxes.
“The number one mistake I see new landowners make is never
establishing their cost basis for their land and timber.”
Based in Park Falls, Wisconsin, Matt works with
landowners throughout the surrounding areas, helping buyers and sellers
navigate not just real estate - but the long-term financial realities of owning
timberland.
What Is Cost Basis - and Why It Matters in Northern
Wisconsin
Much of the land across Northern Wisconsin includes
merchantable timber. Cost basis is the documented value of that land and timber
at the time of purchase, and it plays a critical role in how you’re taxed
later.
“Most new landowners never establish their cost basis for
their land and timber because they don’t know about it or they’re too cheap and
don’t want to spend a few extra dollars right after a major purchase.”
Without this documentation, landowners often face higher
capital gains taxes when they harvest timber or sell the property.
How the IRS Treats Timber Without Cost Basis
If no timber basis is established, the IRS assumes the
timber had zero value at the time of purchase.
“Without cost basis the IRS assumes your timber is worth
zero at purchase, so when you sell it you pay taxes on everything - even though
that timber had real value the day you bought the land.”
For example, if you purchase land for $300,000 and $90,000
of that value is timber, that timber value should be documented. If it isn’t,
you could end up paying capital gains tax on the entire harvest amount - even
though you already paid for that timber upfront.
Why Timing Is Critical
While the solution sounds straightforward, waiting too long
can eliminate your options.
“The fix is simple, but it’s time sensitive.”
Cost basis should be established as soon as possible after
purchase, when timber conditions and market data can still be accurately
evaluated.
“If you wait many years, I cannot accurately model the
timber and market conditions years later, and you’re stuck with no timber
basis.”
This is especially important for buyers in Northern
Wisconsin, where timber markets and forest composition can vary significantly
by location.
Who Should Be Involved
Matt recommends working with a knowledgeable team that
understands both forestry and taxation:
- A
consulting forester
- A CPA
familiar with timber taxation
- Possibly
a family attorney
This coordinated approach helps landowners protect their
investment and plan ahead.
Serving Park Falls and Surrounding Northern Wisconsin
Communities
Through United Country Northern Wisconsin Lifestyle
Properties, Matt works with buyers and landowners throughout Park Falls
and the surrounding Northern Wisconsin areas, helping clients make informed
decisions about land, timber, and long-term ownership strategies.
“If you own land with timber and haven’t done this yet,
don’t wait - give me a call. Let’s talk about your situation and see if this is
a financially smart move for you.”
For additional education, Matt also recommends visiting timbertax.org,
a trusted resource for timber taxation information.
Final Thoughts
Owning land in Northern Wisconsin comes with unique
opportunities - and unique responsibilities. Establishing your cost basis early
is one of the smartest steps you can take to protect your investment and avoid
unnecessary taxes down the road.
If you’re buying, selling, or currently own timberland in Park
Falls or anywhere in Northern Wisconsin, working with professionals who
understand both the land and the numbers makes all the difference.
NOT LEGAL OR
TAX RECOMENDATIONS Consult with your attorney or CPA regarding your specific
situation.