Depreciating aircraft parts, dealing with taxes, etc.

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.

"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

Matt Barrow wrote:


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.

That's all accounting practice, but it has no bearing in regard to
taxes. If you got money in the bank, it is an asset. If it derives
interest, it's income. It doesn't matter what you consider it to be
for use.

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.

None of which has squat to do with taxes.

"Ron Natalie" wrote in message
m...
Matt Barrow wrote:


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.

That's all accounting practice, but it has no bearing in regard to taxes.
If you got money in the bank, it is an asset. If it derives
interest, it's income. It doesn't matter what you consider it to be
for use.

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.

None of which has squat to do with taxes.

Really? Depreciation is not a yearly write off against income?

In a way, you're right though - Businesses do two different accountings, one
for financial reporting and another for taxes. As an example, Inventory can
be LIFO in one, and FIFO in the other.

The discussion was how a pre-paid asset is accounted for. That derived from
"XL builder" saying that companies could avoid taxes by listing future
expenses (not yet incurred) as pre-paid. Demonstrating what a pre-paid
expense is was the point of showing the fallacy of his position.

There is a vast misunderstanding of how depreciation works, what pre-paid
expenses are (read the original post again), what "reserves" are, etc.

Matt Barrow wrote:
"Ron Natalie" wrote in message
m...
Matt Barrow wrote:

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.
That's all accounting practice, but it has no bearing in regard to taxes.
If you got money in the bank, it is an asset. If it derives
interest, it's income. It doesn't matter what you consider it to be
for use.
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.
None of which has squat to do with taxes.

Really? Depreciation is not a yearly write off against income?

I didn't say that. I said that it makes no difference that the money
you are banking in reserve is intended to counter the depreciatable
asset. It makes no difference tax wise whether you are banking money
to buy a second plane for your company or to replace the current one in
the case that it really does depreciate to zero value.

Matt Barrow wrote:
"Ron Natalie" wrote in message
m...
Matt Barrow wrote:


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.

That's all accounting practice, but it has no bearing in regard to
taxes. If you got money in the bank, it is an asset. If it derives
interest, it's income. It doesn't matter what you consider it to be
for use.

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.

None of which has squat to do with taxes.

Really? Depreciation is not a yearly write off against income?

In a way, you're right though - Businesses do two different
accountings, one for financial reporting and another for taxes. As an
example, Inventory can be LIFO in one, and FIFO in the other.

The discussion was how a pre-paid asset is accounted for. That
derived from "XL builder" saying that companies could avoid taxes by
listing future expenses (not yet incurred) as pre-paid. Demonstrating
what a pre-paid expense is was the point of showing the fallacy of
his position.

I was using the that as an example of what someone could NOT do. Hell, Matt
I was agreeing with you.

The poster was saying it was a an expense that just hadn't been distrubuted
yet. I was saying it deosn't matter and used the widget to show grossly why
it wouldn't work.