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#1
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Matt Barrow wrote:
"Ron Natalie" wrote in message m... Matt Barrow wrote: "Andrew Gideon" wrote in message news ![]() 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. |
#2
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![]() "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 ![]() 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. |
#3
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On Fri, 11 May 2007 14:09:41 -0700, "Matt Barrow"
wrote: That's not how a pre-paid expense works. True! An easy to understand example of a pre-paid expense is an insurance premium. You pay for so many months and use up (account for it) one month at a time until it's depleted. |
#4
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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 ![]() 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) |
#5
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On May 11, 7:07 pm, "Jay Somerset" wrote:
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 . com... Matt Barrow wrote: "Andrew Gideon" wrote in message news ![]() 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. Corporations formed to hold an aircraft are incorporated specifically as not-for-profit. Mine is a mutual benefit company, there are other ways but for-profit would never be a good way to incorporate a holding company. It in no way affects the liability protection. The only way to lose the liability protection is to not treat it like a real company (write personal checks for maintenance and not expense them back, etc). -Robert |
#6
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Robert M. Gary wrote:
Corporations formed to hold an aircraft are incorporated specifically as not-for-profit. Not always, and there are some good reasons why you may not want to do this (ultimate disposal of assets). Liability issues are different beasts than taxes, but you really want to maintain the corporation as a company for BOTH purposes. |
#7
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On May 12, 5:08 am, Ron Natalie wrote:
Robert M. Gary wrote: Corporations formed to hold an aircraft are incorporated specifically as not-for-profit. Not always, and there are some good reasons why you may not want to do this (ultimate disposal of assets). If the purpose of the company is to hold the asset I cannot see why you would want to incorporate for-profit. If you someday want to use the company for photography or something, that is a very different subject and pretty much everything said on this thread would not apply. Liability issues are different beasts than taxes, but you really want to maintain the corporation as a company for BOTH purposes. Actually for tax purposes you are much better off not incorporating. When you own the plane directly you can deduct airplane taxes (property taxes). When you hold it in a company you cannot. SInce the company does not have income, the deduction is wasted. -Robert, CFII, MBA, owner Sacramento Flyers, Inc. (a Mooney) |
#8
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![]() "Jay Somerset" wrote in message ... On Fri, 11 May 2007 14:09:41 -0700, "Matt Barrow" wrote: 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). Pre-paid maintenance (into a reserve account) is "paid in capital"? It does not become an expense (prepaid or otherwise) until money actually flow out to some third party. That's what I said. 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! Such as your claim of a sinking fund? 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. WTF? 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. Third sugesstion to Jay: Blow it out your ass, you pompous prick. |
#9
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Matt Barrow wrote:
t 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. A reserve account is NOT a pre-paid expense. A pre-paid expense requires you to pay it to someone. |
#10
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![]() "Ron Natalie" wrote in message m... Matt Barrow wrote: t 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. A reserve account is NOT a pre-paid expense. A pre-paid expense requires you to pay it to someone. I don't recall holding any difference with that. (Are you confusing me with "Builder"?) AIR, you have a reserve to pay a KNOWN FUTURE expense. This is distinct from a CAPITAL account which is set aside to buy a CAPITAL ASSET in the future. As one put it, this is different still from a sinking fund which is, IIUC, how depreciation is handled when a depreciable item will have to be replaced when it's useful life is ended. I'd call my accountant, but I don't want to pay a couple hunderd $$$ to answer "silly" Usenet questions! :~) -- Matt Barrow Performace Homes, LLC. Colorado Springs, CO |
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