The loss must be physical in nature and caused by an identifiable event or combination of events that has run its course. A deduction is allowed only if the damage renders the timber unfit for use. Normal levels of losses are a cost of doing business and cannot be deducted. Your loss deduction is limited to your adjusted basis in the timber destroyed, minus any reimbursement or other compensation received, which may not equal the timber's fair market value. The tax law permits landowners to recover their investment in lost timber, but does not act as insurance.
Timber destroyed traditionally is measured in units of volume, like cords or board feet.
Wildfire burns 10 acres, destroying 25 MBF of timber. Extreme drought kills the seedlings on 15 acres of a 20-acre stand that you planted two years ago. If the timber destroyed is salvageable, you are obligated to make a genuine effort to sell it. Qualifying replacement property includes things like the cost of seeds or seedlings, site preparation, planting, restoration and repair, or the purchase of a replacement timber site. Reduce the loss by the amount of any reimbursement you receive or expect to receive.