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expenditure could be deducted only when the trees were ultimately sold. Section 6 now permits a farmer to deduct from his farm income any expenditure incurred for the following purposes : (i) Planting trees for shelter or to prevent erosion or otherwise for agricultural or pastoral purposes : (ii) Maintaining trees already planted : (iii) Erecting or maintaining fences to protect such trees. Section 7 gives relief from the incidence of the graduated income-tax where intermittent or occasional sales of timber-trees are made by farmers. A farmer who sells trees from his property may apply to the Commissioner of Taxes, not later than twelve months after the close of the income year, and be granted permission for the income from the timber sales to be apportioned between that income year and the four succeeding income years. This overcomes the serious objection against the former taxation procedure whereby revenue from the sale of trees was treated as income for that year only, and was added to the general farm income, and taxed, through the operation of progressive taxation, at high rates. 5. The Act stipulates that these two concessions shall be available in respect of " trees planted to provide shelter or to prevent erosion or otherwise for agricultural or pastoral purposes." The Forest Service considers that these conditions are too restrictive, and takes the view that they should be entirely waived so that the concessions may embrace all farm wood-lots. But although the Forest Service intends to press for the removal of these restrictions, it is believed that in practice there would be few farm timber sales that would not qualify for the concession. Where wood-lots are established on a farm without any specific thought to shelter or the control of erosion it is normally on portions of the farm relatively unsuited to general farming purposes ; hence it becomes a question of optimum land use, and discussion with the Commissioner of Taxes indicates that the clause " otherwise for agricultural or pastoral purposes " is wide enough to cover any case that can be decided on the broad issue of optimum land use. 6. Taxation of Company Forestry.—Taxation has also been a very thorny question with the afforestation companies, but one of the biggest issues was dealt with during the year, a satisfactory agreement being reached with the Commissioner of Taxes. This related to the method of assessing forest income for tax purposes, and provides for all expenditure of a non-capital nature to be deducted before tax is charged, irrespective of what particular area that expenditure refers to. This means that the forest is now regarded as a unity, and it is no longer the case that expenditure on blocks not being actively exploited has to be capitalized until cutting commences. The significance of this amendment is that it provides an incentive to the companies to adopt a higher standard of forest maintenance and protection. 7. There are still several aspects of taxation which call for revision and amendment—particularly the application of the graduated land-tax. These are under review at the time this report is made. Forest Extension 8. General. —Forest-extension work in the past year was pretty well limited to advice to farmers and others in response to personal inquiries or letters, and to addresses to farmers' organizations, rotary clubs, chambers of commerce, and other groups who specially requested them ; Forest Officers carried out this work in addition to their normal duties. 9. Private Nurseries.—The complaint is often heard that private nurseries are unable to supply trees for farmers' planting projects, but the shortage of trees is largely due to a lack of forward ordering ; if they had placed their orders one or two years beforehand they would have had little trouble, because the nurserymen could have

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