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Harold Elliott. Mr. Elliott first became acquainted with the
Timber Property as a child--his father, a logging contractor, had
managed a 15,000-acre tract of timberland owned by JLJ (the JLJ
Property) that included the Timber Property. After college, Mr.
Elliott was employed by a forestry consulting firm that was
managing the JLJ Property, and in 1964 he became the general
manager and forester of the JLJ Property and continued to manage
the Timber Property when it was transferred to Johnco after the
dissolution of the partnership.
Mr. Elliott had considerable latitude in the management and
harvesting of timber from the Timber Property during his tenure.
Subject to John's approval, Mr. Elliott would determine what
timber to harvest, based upon his assessment of timber growth,
growing conditions, and prevailing market prices. Trees likely
to be cut were those that would command the highest market
prices5 and trees in areas that required thinning to promote
maximum timber growth. Harvesting decisions were conservative,
tilted towards future growth rather than current realization of
income.
C. Section 631(a) Election
On the valuation date, Johnco had made a valid election
under section 631(a), pursuant to which it treated the cutting of
5 As a tree matures, its value may increase not only because
it contains a greater volume of wood, but because the tree's
timber is suitable for a more valuable use. Telephone poles, for
example, require tall, straight trees; timber suitable for
producing telephone poles commands a much higher price than
immature or crooked trees used in the production of paper.
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Last modified: May 25, 2011