Your comment again makes no sense. Land is NOT depreciable and neither is stock. Depreciation is not an exemption of taxes. You must realize that selling something that has been depreciated results in you selling it for a profit and thus is taxable. Depreciation reduces the cost basis. I’m not sure if at this point you are trolling by your comments always saying the opposite of the actual tax laws.
I never said land deprecated try reading my comment again: “if a company buys say land they can’t deduct anything” that’s an example of default behavior. Try rereading what I actually said where again you can deduct the purchase price at the time of sale not purchase.
As to depreciation being an exception that’s what it means when you change the baseline rules of a system with new rules. By default you take the deduction on sale, depreciation means you can take deduction early. It’s literally called “Modified Accelerated Cost Recovery System (MACRS)” the entire point of it is to speed things up rather than as you suggest slow anything down. Thus removing depreciation from the tax code and companies would need to wait years or even decades or deduct these costs from their profits. Thus as I said before it’s a hand out which happens to be built into the tax code.
It’s not a hand out whatsoever. Firstly you are making an assumption that everything that is depreciated can be sold when the majority of depreciated items are not sold, ever. They get used up over time, kind of like... depreciation. That is why that capitalized items are capitalized, not land, which again _does not get depreciated_ so I don’t know why you would use that as your comparison for normal deduction. You are looking at this absolutely backwards. Let’s say depreciation was eliminated completely in your perfect world, because you say it’s a hand out right? Now you buy something for $100,000, say construction of a building, that building falls apart and breaks down after 39 years, it was not sold. Now you have nothing to sell and never got any deduction. Now who wants to spend their money on something that is never recognized as a cost? Depreciation is there to normalize the recognition of that building falling apart. Of course all types of items depreciate at different time periods which are all defined by law. Unless you are in favor of there being no deductions for taxes of all costs, meaning you tax gross revenue, there is no reason not to depreciate. Accelerated depreciation means you pay less tax and have more money at the start of a project when it is needed and pay more to the government later when it has stabilized. Again depreciation reduces cost basis, so even if you sold it, you pay additional taxes on that when you sell it, offsetting the benefit of your depreciation. Now where is the hand out in that?
Now you buy something for $100,000, say construction of a building, that building falls apart and breaks down after 39 years, it was not sold.
The day it falls down it stops being useful, the day before that you have full use and therefore value of the building.
Or as I said several posts ago: “The general rule is something is a deductible expense at the point of destruction or sale not purchase.” Sure, it burned in a fire fine assuming you don’t have insurance then it’s a loss at that point.
Really equipment is generally binary either it works or it’s broken, unless you’re selling it then it’s exactly as useful on day 2854 as 2855. Worse, well maintained equipment lasts far beyond the accelerated depreciation benchmarks used. Anything not thrown away the day it’s theoretical value hit’s zero is unambiguously a subsidy, but so is anything with scrap value etc. But, as I clearly demonstrated the idea of depreciation it’s self was created as a subsidy.
> Accelerated depreciation means you pay less tax and have more money at the start of a project when it is needed and pay more to the government later when it has stabilized.
People say stuff like this, yet hopefully suggesting the government hands out zero interest loans to group X raises red flags. Depreciation is a subsidy in effect a zero interest loan and that in and of it’s self is a problem. Opportunity cost is a huge deal and trying to ignore that is why central planning fails.
And who decides when it has “stopped working.” It is standardized to 39 years because it is impossible to prove for every single item individually and people would then be incentivized to not take care of their possessions so they can finally deduct it. This is all besides my original point which is that accelerated depreciation is a big factor in determining whether projects occur, the opposite of the article. You yourself are calling it a subsidy and a loan, and so even if your reasoning is wrong, would agree with me that it is something that helps make a project feasible. So all this arguing is just you trying to argue. Get your CPA and talk to me again.
Initially the company, though audits and penalties help keep them honest.
> accelerated depreciation is a big factor in determining whether projects occur
And clearly that’s a problem. Just as government farm subsidies waste money growing excess food accelerated depreciation causes significant economic waste.
> CPA
Ahh, there’s your problem a CPA has nothing to do with economic issues. This is an economic and thus a policy issue but you’re trying to argue based on the existing law rather than the underlying reality. I don’t expect you to get a in depth education on the topic, but if you’re interested I can recommended some good books to get you started.
But to summarize a huge body of work, the broken window fallacy demonstrates that economic activity isn’t inherently beneficial. Maximum efficiency isn’t equivalent to maximum GDP etc. As such policies that increase economic activity can be and generally are detrimental.
