On Fri, 11 May 2007 14:09:41 -0700, "Matt Barrow"
wrote:


"Gig 601XL Builder" wrDOTgiaconaATsuddenlink.net wrote in message
...
Matt Barrow wrote:
"Ron Natalie" wrote in message
m...
Matt Barrow wrote:
"Andrew Gideon" wrote in message
news On Thu, 10 May 2007 16:18:34 -0700, Robert M. Gary wrote:

What taxable income are you trying to defer with depreciation???
I'm not sure that it's taxable income (which is part of my
problem), but I'm envisioning this asset called a "reserve
account" growing over the years until an overhaul is required.


It's not an asset, it's a pre-paid expense.

The money is "spent", it just hasn't been distributed yet.

As far as taxes in a corporation is concerned, it's an asset.
It doesn't matter that it's been allocated for a particular
purpose, if it's still sitting in the bank account it ain't
spent.

Written against a liability, rather than Earnings.

This is true. If it weren't the case no corporation would ever pay taxes.
They'd just say the money they earned was going to be spent for widgets at
some time in the future.

That's not how a pre-paid expense works.

It's not a damn prepaid expense -- it is a sinking fund (paid in capital).
It does not become an expense (prepaid or otherwise) until money actually
flow out to some third party.

My suggestion -- go buy a book on accounting! Most of the posts in this
thread are seriously out of touch with accounting principles and/or
understanding of financial accounts!

If there is no business that can (even in theory) earn a profit, then there
is no depreciation expense and no insulation from liability through the
corporation.

Second suggestion (to the OP) -- hire an accountant and/or a tax advisor
before you dig yourself into a hole that the IRS will trip over.
--
Jay.
(remove dashes for legal email address)