|
Posted by DORFMONT@aol.com (Linda Dorfmo on May 31, 2007, 12:58 am
Please log in for more thread options
>> DORFM...@aol.com (Linda Dorfmont) wrote:
>> .....
>> This is similar to a client here who bought more than a 100
>> acres for development. Each commercial parcel was of a
>> different size, and the residential lots more or less equal
>> in size. All costs had to be first identified with the
>> parcels affected and then capitalized according to acreage
>> of each parcel. Thus all lost were part of inventory.
>> Even the interest was capitalized, thus there was very
>> little g&a expense.
>>> Also my client is buying property to flip in Texas. He plans
>>> to hold it for a while until the market recovers to a level
>>> where he can recover his costs and make a profit. If he
>>> rents the property out for the convenience of his company
>>> while he is holding it, does he have to take depreciation?
>>> The property was acquired in the normal course of business
>>> and will be sold at an appreciated price. The rental is just
>>> to get some income to cover costs while it is being held.
>> I don't see any way out of taking allowable depreciation as
>> a matter of course. After all, a bird in the hand is
>> worth.... two.. uh... how does that go?
> I found this to be an interesting post because I knew there
> would be several ways to view this problem. Now I'll play
> devil's advocate by introducing another "solution";
>
> Technically, the person preparing the 2005 return apparently
> did not seek/receive permission to file for a change in
> accounting method. Even if a method is flawed, changing it
> requires permission. Therefore, consideration should be
> given to amending the 2005 return to use the old method,
> then file 2006 and 2007 the same "wrong" way since the time
> to apply for an accounting change has lapsed for these year
> too. Finally, for 2008, make application to change the
> accounting method and give the taxpayer the 4 years to make
> up the tax increase difference. The obvious problem with
> this solution is explaining why the 2005 return is being
> amended. It will necessitate admitting what items and why
> they are being changed, which might be questioned:-)
There wouldn't be any difference in taxes since both the
COGS section and the G & A section are above the bottom
line. The issue is attracting the IRS attention with a major
difference in Gross Profit (in the middle) from one year to
the next. I don't think this needs IRS permission.
Linda Dorfmont E.A., CFP, CSA
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
| 
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap