Taxes matter in forestry, affecting most business decisions by for-profit firms and individuals. Ultimately, forest investors care about after-tax cash flows and values. Once income is withheld or designated for taxes, it is no longer available for consumption or investment. Forestland owners and timberland investors are subject to local and federal taxes, and these taxes differ by state and county (and country).
Federal taxes classify income into two categories: capital gains and ordinary income. Capital gains are profits on the sale of capital assets (such as real estate). Ordinary income is that which does not qualify as capital gains.