Whitepaper: reducing tax and increasing profitability
Real Asset Management
During this investigation it may be found that a number of fully depreciated assets are not present. Those items should be removed from the property register and this will save on both property taxes and insurance. While it is possible to extend the accounting lives in the corporate book, it is usually not permissible to change the tax lives. Tax lives are set up based on the Internal Revenue Code and applicable IRS regulations. For taxes, it makes no difference to fully write off an asset before its real useful life expires. There is, however, one circumstance where a company might want to review tax lives and what usually is accelerated depreciation. If a company has a Net Operating Loss carry forward it may not be possible to extend tax lives on existing assets, so check with a tax advisor. The company certainly would want to stop accelerated depreciation on all new acquisitions and go to a much longer life for tax depreciation than the minimum life currently provided. In this instance, many companies profitably explore the possibility of leasing, where the tax benefits are captured by the lessor and in exchange the company obtains a lower cost of funds. Again, this is something to be discussed with a tax advisor. Dedicated fixed asset software can provide many benefits in terms of maximizing cash flow from reduced tax payments. At the same time companies can often extend the anticipated lives of assets for financial reporting, which will decrease expense and increase reported earnings, earnings per share and Return on Investment. The important message to take from this whitepaper is that companies should consider running ‘what if’ analyses. Companies should not tie their hands with an outdated practice or policy such as making the book and tax depreciation identical. It is permissible to separate them, the tools for doing this are available, and the benefits will be substantial.
About Real Asset Management Real Asset Management (RAM) is a leading provider of CMMS and fixed asset management solutions. RAM’s solution is used by over 3,000 clients in more than 70 countries. RAM delivers high-quality, customizable software solutions worldwide. We offer a range of training and consulting services designed to enable our clients to make the most of their CMMS system. Please visit www.realassetmgt.com to find out more or call 617 457 7838 to arrange a call to discuss your requirements and setup a web demonstration.
Real Asset Management
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