Oct 2 - Note Does not include personal assets such as...

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October 2, 2006 Federal Income Tax Notes INDOPCO CASE -Investment banking fees and legal fees in selling company are to be capitalized, not expensed. Court agreed with IRS that fees had to be capitalized. Referred Lincoln Savings where capitalization was required when created or enhancing a separate distinct asset. However, this is only one thing that requires capitalization and other situations without this quality also require capitalization. Court looked at benefits of merger with Unilever and that courts have long recognized that changing corporate structures for benefits of future have been capitalized. Section 167 (a) Depreciation; what is deprecation Reasonable allowance for exhaustion, wear and tear, obsolescence… of property used in trade or business and of property held for the production of income.
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Unformatted text preview: Note: Does not include personal assets, such as personal residence or personal automobiles. Depreciation: Advanced recuperation of cost of property. Section 168: How to calculate depreciation Depreciation trend has been to accelerate (ARCS was too fast, MACRS replaced it but still better than SL). What kinds of things are depreciable? Harrah’s Club: Restoration of cars not depreciable because they didn’t wear out or become obsolete. Also no salvage value and usually appreciate. Simon and Liddle: Violin bows did wear out when being actively used. But art does not depreciate. Even if the bows are going to go up in value, that does not disallow depreciation. And if wont wear out in 100 years, still not grounds for disallowance of depreciation....
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Oct 2 - Note Does not include personal assets such as...

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