31-Aug-2016 10:45am
31-Aug-2016 10:57am
31-Aug-2016 11:00am
31-Aug-2016 1:45pm
1-Sep-2016 11:51am
1-Sep-2016 12:18pm
1-Sep-2016 2:30pm
6-Sep-2016 7:05am
6-Sep-2016 11:03am
6-Sep-2016 11:51am
Noobie wrote:If they are looking to make a gain on the sale, who cares about the depreciation?
12-Jun-2019 7:21pm
Coddington wrote:Y'know, Harry, the one thing that has always bothered me about this issue is whether the rental is in a trade or business. If it is, then the treatment is different from the above and it wouldn't stop depreciating, etc. But if it is merely held for the production of income, then stuff happens under 212.
12-Jun-2019 8:43pm
21-Aug-2019 11:58pm
Coddington wrote:That's one of those weird things. Section 167 doesn't discriminate and the case law makes very clear that an asset used in a trade or business keeps depreciating until disposed of or converted to personal use. Why the same rule doesn't apply to rentals held solely for the production of income I do not know.
The deductions allowed by part VI (Sec. 161 and following), by section 212 (relating to expenses for production of income), and by section 611 (relating to depletion) which are attributable to property held for the production of rents or royalties.
The deductions described in clause (1) above are limited to those which fall within the category of expenses directly incurred in the carrying on of a trade or business. The connection contemplated by the statute is a direct one rather than a remote one. for example, property taxes paid or incurred on real property used in the trade or business will be deductible, whereas state income taxes, incurred on business profits, would clearly not be deductible for the purpose of computing adjusted gross income. Similarly, with respect to the deductions described in clause (4), the term “attributable” shall be taken in its restricted sense; only such deductions as are, in the accounting sense, deemed to be expenses directly incurred in the rental of property or in the production of royalties. *** (S. REPT. 885, 1944 C.B. AT 877-878)
The language and structure of section 62(a) reveal Congress's intent that state income taxes levied on net royalty income (gross royalty minus production taxes, overhead, operating expenses, and depletion) are not deductible above-the-line. Such income taxes are not expenses incurred in the production of the royalty. See Accountants' Cost Handbook, 1.9 (James Bulloch et al. eds., 3d ed. 1983) (defining expenses as “expired costs ...used to produce revenue”). Above-the-line deductions must be attributable to “property held for the production of ...royalties” — not attributable to the royalties derived therefrom. I.R.C. section 62(a)(4) (emphasis added). The language and sentence structure plainly divide the “property” from the derived “royalties.”
22-Aug-2019 6:29am
22-Aug-2019 7:56am
Chay wrote:Can we conclude from the court's opinion that an effort to sell the assets formerly used in a business is a continuation of the business activity itself? Is this true even if the taxpayer has no intention to resume operations in the event that the sale is unsuccessful? What about the expenses of maintaining the business assets held for sale?