Lecture 28 - The Most Taxing Questions or We Depreciate You

Calculating everyone profits profits sec says how to

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Unformatted text preview: ofits SEC says how to do it for business reporting Enron, MCI, Tyco, and Arthur – Anderson do it any way that Enron, looks good looks Feds say how to do it for their taxes States say how to do it for theirs Idea that companies have 5 sets of books is not Idea unusual unusual How do the Feds Do it? How 1971 U.S. Treasury Dept collected data 1971 on equipment lives – plotted the midpoint of the distribution and called it the Asset Depreciation Range (ADR) Depreciation This created standard lives for Property Reagan Revolution Economy in stagflation / World poised for Economy Nuclear annihilation with cold war Nuclear Reagan’s Solution Reagan’s Grow the economy out of stagnation and Grow bury the Soviets with military spending bury Key pin was stimulating investment and Key activity activity He stimulated investment with tax credits He and an accelerated depreciation system and He used artificially short depreciation lives Called Modified Accelerated Cost Recovery Called System (MACRS) System Understanding MACRS Understanding Have to Divide Up Depreciable Property Tangible Property (can touch and feel it) We’ll deal with intangible later Tangible Property Real – land buildings, things upon or Real attached to land attached Personal Property – things like equipment Personal and furniture are not really attached and Divide Personal Property into Life Classes Life Three Year – Food and Bev handling equipment, tools for producing metal or plastic goods and autos, anything with an ADR life of 4 or under life Five Year – Autos for business (not yours), trucks, aircraft, research equipment, computers, oil drilling equipment, anything with an ADR less than 10 years (and more than 4) with Seven Year – Office furniture, fixtures, rugs, equipment, anything with ADR less than 16 years anything Ten Year – Oil Refining Equipment, barges and ships, anything with ADR less than 20 years with Fifteen Year – Telephone Distribution Lines, Sewerage Plants, anything with an ADR less than 25 years anything Twenty Year – Municipal sewers, personal property with an ADR of more than 25 years ADR The Real Property Classes The Commercial non-residential property Commercial (includin...
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