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Old 02-07-2011, 12:19 AM
 
Location: Conejo Valley, CA
12,476 posts, read 16,966,907 times
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If you sell an asset for $50 that you owe $100 all that occurs is that you remove the previous value of the asset from your ledger and include the $50 in cash on the asset side of the ledger. The $100 stays on the liability side. Whether or not you can sell the asset for less than you owe on it is a completely different issue, this will depend on the structure of the underlying debt.

There is nothing "theoretical" about one's balance sheet. Assets should be accurately valued on the balance sheet and regularly updated, similarly for one's liabilities.

 
Old 02-07-2011, 12:24 AM
 
Location: Moscow
2,078 posts, read 2,903,275 times
Reputation: 2523
Quote:
Originally Posted by Themanwithnoname View Post
(Sighs) I have stated SEVERAL TIMES that I understand the way it is broken down (as you say) FOR BASIC ACCOUNTING PRACTICE...

My point (AGAIN):
That's numbers on a page, and, while VERY important for 'balancing the books' and 'knowing where you stand' is (Again) Theoretical, vs actual.

-You recite this in an attempt to draw attention from the FACTS... just as your last line attempts to circumnavigate the FACT that I am right, and what I say is the way it REALLY IS. (Wether your debt free or not)

If you Owe $100 on something you can sell (IF there si a buyer) for $50...

You've taken a $50 LOSS!

That's loss... not a gain/asset.

When you CAN'T EVEN SELL IT unless someone else says "ok"... it's not yours.

Disagree? Tell that to the people who got foreclosed on.
2 points:
1. Try telling the IRS that there is a difference between theoretical "numbers on a page," and reality.
2. I think I see where your confusion lies. You are conflating an asset with a gain. They are not the same. Here is the definition of asset from dictionary.com:
1.
a useful and desirable thing or quality: Organizational ability is an asset.
2.
a single item of ownership having exchange value.
3.
assets,
a.
items of ownership convertible into cash; total resources of a person or business, as cash, notes and accounts receivable, securities, inventories, goodwill, fixtures, machinery, or real estate ( opposed to liabilities).
b.
Accounting . the items detailed on a balance sheet, especially in relation to liabilities and capital.
c.
all property available for the payment of debts, especially of a bankrupt or insolvent firm or person.
d.
Law . property in the hands of an heir, executor, or administrator, that is sufficient to pay the debts or legacies of a deceased person.

To take your example: If you owe $100 and can sell the item for $50 it still meets the definition of an asset.
 
Old 02-07-2011, 12:28 AM
 
Location: Moscow
2,078 posts, read 2,903,275 times
Reputation: 2523
Quote:
Originally Posted by user_id View Post
If you sell an asset for $50 that you owe $100 all that occurs is that you remove the previous value of the asset from your ledger and include the $50 in cash on the asset side of the ledger. The $100 stays on the liability side. Whether or not you can sell the asset for less than you owe on it is a completely different issue, this will depend on the structure of the underlying debt.

There is nothing "theoretical" about one's balance sheet. Assets should be accurately valued on the balance sheet and regularly updated, similarly for one's liabilities.
Thank you, User_id.
 
Old 02-07-2011, 12:53 AM
 
5,470 posts, read 8,160,530 times
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Quote:
Originally Posted by user_id View Post
If you sell an asset for $50 that you owe $100 all that occurs is that you remove the previous value of the asset from your ledger and include the $50 in cash on the asset side of the ledger. The $100 stays on the liability side. Whether or not you can sell the asset for less than you owe on it is a completely different issue, this will depend on the structure of the underlying debt.

There is nothing "theoretical" about one's balance sheet. Assets should be accurately valued on the balance sheet and regularly updated, similarly for one's liabilities.
And there is where it all falls apart.

Since you CANNOT do this without selling... It is NOT a "Completely different issue"

-We have already identified the structure of the debt. I will concede you are right IF WE ARE ONLY TALKING ABOUT THE BOOK KEEPING.
(As I have been saying)
IF we are not... I am correct.

I AGAIN: Offer to have you do as I say and get back to me (Try to sell an underwater 'asset' with no other financing.)

And yes, there is PLENTY 'theoretical' about a balance sheet. You 'theorize' that there will be a buyer, at, or around a set price.
-I'm having 'theory' meet 'reality' right now in a particular asset field.
It's really bringing home what I'm outlining.
 
Old 02-07-2011, 01:05 AM
 
Location: Conejo Valley, CA
12,476 posts, read 16,966,907 times
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Quote:
Originally Posted by Themanwithnoname View Post
Since you CANNOT do this without selling... It is NOT a "Completely different issue"
You can't do what without selling? And yes, it is indeed a different issue. An asset that is secured by a debt that happens to be underwater is illiquid, that doesn't change the fact that it is still an asset on the ledger. There is nothing theoretical about it, the asset has real value.


Quote:
Originally Posted by Themanwithnoname View Post
And yes, there is PLENTY 'theoretical' about a balance sheet. You 'theorize' that there will be a buyer, at, or around a set price.
If this is your definition of "theoretical", then everything is theoretical. After all, you theorize that the earth will exist tomorrow.

A real balance sheet is going to divide up the assets by type acknowledging the fact that some assets are liquid and some aren't. Illiquid assets are harder to value, but you can still estimate their value.

Anyhow, I have no idea what you think you're correct about. You appear to be combining numerous different issues into one incoherent mess.
 
Old 02-07-2011, 01:14 AM
 
5,470 posts, read 8,160,530 times
Reputation: 7284
Quote:
Originally Posted by Keim View Post
2 points:
1. Try telling the IRS that there is a difference between theoretical "numbers on a page," and reality.
2. I think I see where your confusion lies. You are conflating an asset with a gain. They are not the same. Here is the definition of asset from dictionary.com:
1.
a useful and desirable thing or quality: Organizational ability is an asset.
2.
a single item of ownership having exchange value.
3.
assets,
a.
items of ownership convertible into cash; total resources of a person or business, as cash, notes and accounts receivable, securities, inventories, goodwill, fixtures, machinery, or real estate ( opposed to liabilities).
b.
Accounting . the items detailed on a balance sheet, especially in relation to liabilities and capital.
c.
all property available for the payment of debts, especially of a bankrupt or insolvent firm or person.
d.
Law . property in the hands of an heir, executor, or administrator, that is sufficient to pay the debts or legacies of a deceased person.

To take your example: If you owe $100 and can sell the item for $50 it still meets the definition of an asset.

Point one: People (Such as yourself I imagine) do that for me. And in other cases do it all the time.
I've had a couple LLC's to (Legally) as I call it 'run money through' and I witnessed that you can tell the IRS many different things.
Including that a 'business' ether LOST money (And make it 'legally/accoutningly' "be" so.)
-"Business expenses" "Tax Write offs" "Depreciation" etc.

You can have more money at the end of the year, but (legally) have it look like you took a bath.

Point 2:
Quote:
1.
a useful and desirable thing or quality: Organizational ability is an asset.
Well, while some of these people/banks sitting on homes no one will buy seems to stretch the point... for $1 they will find a buyer!
-Too bad the bank would take that $1 (And not let them do the sale in the first place)

Quote:
2.
a single item of ownership having exchange value.
Do you recall when I said that (Talking about the house you are Underwater $50K in) "YOU DON'T OWN IT, THE BANK DOES"
-And lets NOT get into the 'Book-keeping' they are currently doing to keep from calling a liability an asset... and the Gov't bailouts to perpetuate this...


Quote:
a.
items of ownership convertible into cash; total resources of a person or business, as cash, notes and accounts receivable, securities, inventories, goodwill, fixtures, machinery, or real estate ( opposed to liabilities).
As I said, take that House your $50K underwater in, and convert it to cash...
I want to see it.

-Seems what's happening all over is that the bank takes it (Where it becomes a liability once they foreclose) and you have a DEBT to the bank for 'the balance'
WHERE's the asset?
Liability to the bank, and a liability (Debt) to you...

Quote:
b.
Accounting . the items detailed on a balance sheet, especially in relation to liabilities and capital.
ABSOLUTELY, as I have been stipulating for some time.

Quote:
c.
all property available for the payment of debts, especially of a bankrupt or insolvent firm or person.
If you break even... Ok. But as we have seen outlined above... when there's the $50K underwater... it's a liability for the bank, and a liability for the individual.


Quote:
d.
Law . property in the hands of an heir, executor, or administrator, that is sufficient to pay the debts or legacies of a deceased person.
^ Ya see that little 'boldened portion' there... It's saying EXACTLY what I'm saying.

Thank you for pointing this out.



Quote:
To take your example: If you owe $100 and can sell the item for $50 it still meets the definition of an asset.
And when the bank WILL NOT LET YOU SELL....


You seem to like definitions, here's some for you:
Asset - Definition and More from the Free Merriam-Webster Dictionary
Quote:
Origin of ASSET

back-formation from assets, singular, sufficient property to pay debts and legacies, from Anglo-French assetz, from asez enough, from Vulgar Latin *ad satis, from Latin ad to + satis enough more at at, sadFirst Known Use: 1531

Quote:
a : an item of value owned
Which, you do not if your $50K in the hole to the bank and (Here's the telling part) THEY RETAIN Title (Lean on etc depending on the state)

Again, it comes down to: Can you do as you please with it?
(Give away, sell etc without permission/financial arrangements)

Seems (According to Webster) if your asset (House) is NOT sufficient:
Quote:
to pay debts
Example: $50K underwater.

It's NOT AN ASSET.

Don't argue with me, Argue with Webster.


Sadly, many people have 'bought into the lie' just as many assumed that housing could go nowhere but up!
 
Old 02-07-2011, 01:30 AM
 
5,470 posts, read 8,160,530 times
Reputation: 7284
Quote:
Originally Posted by user_id View Post
You can't do what without selling?
Move your numbers around.
-Unless you want to do jail time!
(I had boldened the passage I was addressing to answer this question.)
Quote:
Originally Posted by user_id View Post
And yes, it is indeed a different issue.
I will AGAIN stipulate: To the accountant.
NOT to the home 'owner'
Quote:
Originally Posted by user_id View Post
An asset that is secured by a debt that happens to be underwater is illiquid, that doesn't change the fact that it is still an asset on the ledger. There is nothing theoretical about it, the asset has real value.
Don't argue with me, Argue with Webster. (Or the banks... they are admitting it in the housing market... although it's been slowed/hidden by the theft of taxpayer money in the form of bailouts.

And your missing the point: I'M NOT ARGUING WHAT"S ON THE LEDGER!

Quote:
Originally Posted by user_id View Post
If this is your definition of "theoretical", then everything is theoretical. After all, you theorize that the earth will exist tomorrow.
No, once something has been realized (A sale) it moved from theoretical to factual. (assuming the check clears!
Until then.... it's a week before Enron's collapse for all we know!
-Or those houses where banks lent MUCH more than they are 'worth'
-Don't count your chickens and all that.

Quote:
Originally Posted by user_id View Post
A real balance sheet is going to divide up the assets by type
Irrelevant to the issue at hand.

Quote:
Originally Posted by user_id View Post
acknowledging the fact that some assets are liquid and some aren't. Illiquid assets are harder to value, but you can still estimate their value.
OH! NOW we are "Estimating" are we? What happened to "Not theoretical" and your 'solid numbers'
We never know until the dust settles.
Quote:
Originally Posted by user_id View Post
Anyhow, I have no idea what you think you're correct about. You appear to be combining numerous different issues into one incoherent mess.
No. I am agreeing with your concern about the 'balance sheet' and saying:
To the homeowner/in the real world and not on paper, you are guessing/estimating (As you admit) and that (As Webster says) if something is not adequate to satisfy the debt on that item it is NOT an asset.

-Example: Bank foreclosure.
For the bank, "the morgage" was considered an asset. When they take possession (Repossession)... it's a liability.
Same thing, differing classification.

FOr the Individual... who owned the home with the bank, if it's underwater he not only doesn't get any money (Assets), but unless it is forgiven (A debt) he OWES money to the bank (Another Debt)

These are not different issues. They concern whether something is an asset to a man. You are used to seeing parts of the issue and refuse to see the issue as a whole.
 
Old 02-07-2011, 07:56 AM
 
Location: USA
70 posts, read 149,972 times
Reputation: 37
Quote:
Originally Posted by Rakin View Post
There are 3 generations of rich in a family:

1st Generation is frugal, works hard and builds a great business. Teaches kids the value of a buck.

2nd Generation just tries not to screw it up and lives a pretty nice lifestyle. Raises spoiled kids.

3rd Generation is the spoiled kids who did not earn it, has no concept of how to keep it going, lives lavishly, parties hard, does drugs and files bankruptcy. They blow everything Grand Pa worked to build.

Not all rich folks are frugal but the ones who earned it usually are.

Sad but true. This is very close to reality (if not the bulls eye truth-no pun intended!) but the point is, rich people who have inherited the lavish life just do not know what is the real meaning of frugality. In this scenario, 2nd generation is where the backslide started when the value of spend-thrifting was taken for granted.
 
Old 02-07-2011, 10:40 AM
 
Location: Conejo Valley, CA
12,476 posts, read 16,966,907 times
Reputation: 4304
Quote:
Originally Posted by Themanwithnoname View Post
And your missing the point: I'M NOT ARGUING WHAT"S ON THE LEDGER!
Right, you're just ranting. What you're pointing out is simply that some assets may be illiquid because they are secured by a debt on the liability side.


Quote:
Originally Posted by Themanwithnoname View Post
No, once something has been realized (A sale) it moved from theoretical to factual. (assuming the check clears!)
Most assets people and businesses have on their balance sheet are pretty easy to value. The balance sheet is not static, its updated regularly using current evaluations.


Quote:
Originally Posted by Themanwithnoname View Post
OH! NOW we are "Estimating" are we? What happened to "Not theoretical" and your 'solid numbers'
We never know until the dust settles.
Again, with your definition of "theoretical" everything is theoretical. You want certitude, but there are very few things you can be certain of in this world. Assets are valued using currently available information, in some cases the evaluation is very accurate (e.g., stocks, bonds, etc) in other cases there can be a decent margin of error.


Quote:
Originally Posted by Themanwithnoname View Post
FOr the Individual... who owned the home with the bank, if it's underwater he not only doesn't get any money (Assets), but unless it is forgiven (A debt) he OWES money to the bank (Another Debt)
This is all backwards. The home owner has an asset (the house) and a liability (the mortgage). The home owner can at any time sell the house and receive the funds from the sale, but since the mortgage is a secured debt he must pay off the mortgage when he sales the home. Being underwater doesn't change this picture at all, in the case of being underwater the seller needs to come up with additional funds beyond what he received for the home.

The details here are actually very important and the IRS sees it just as I described, they don't see it as you are describing it. For example, let's suppose that you purchased the home for $200k and owe $400k on it (pulled equity out). Now you need to sale, but the home can only sale for $350k. Here the transaction occurs just as I described above, the seller will receive the $350k and since they paid $200k the remaining $150k will be considered capital gains for tax purposes. But its a secured debt, so the seller has to come up with an additional$50k beyond the $350k he got for the home to satisfy the mortgage.

Now, I'm sure you'll rant some more. But I have sufficiently explained matters so I'm done.
 
Old 02-09-2011, 11:52 AM
 
5,470 posts, read 8,160,530 times
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Quote:
Originally Posted by user_id View Post
Right, you're just ranting. What you're pointing out is simply that some assets may be illiquid because they are secured by a debt on the liability side.
No, I am not ranting. I am answering (Which is more than you are doing) And you are attempting to ignore my points by calling names.
A illiquid asset would be a house in a housing market which was a buyers market... NOT something which you owned more on than it was worth and therefore could not sell. (But had to keep spending money on)


Quote:
Originally Posted by user_id View Post
Most assets people and businesses have on their balance sheet are pretty easy to value. The balance sheet is not static, its updated regularly using current evaluations.
This has NOTHING to do with my statement.


Quote:
Originally Posted by user_id View Post
Again, with your definition of "theoretical" everything is theoretical. You want certitude, but there are very few things you can be certain of in this world.
Point? I know this. It does not detract from the fact that those things mentioned are ina state of flux.
Quote:
Originally Posted by user_id View Post
Assets are valued using currently available information, in some cases the evaluation is very accurate (e.g., stocks, bonds, etc) in other cases there can be a decent margin of error.
Yep. Still not pertinent.


Quote:
Originally Posted by user_id View Post
This is all backwards. The home owner has an asset (the house) and a liability (the mortgage). The home owner can at any time sell the house and receive the funds from the sale,
Ummm, no, he cannot. THAT's THE WHOLE POINT.
Everyone bought into the LIE that housing would continue to 'go up forever' and also used their houses as personal ATM's.
NOW, people are stuck with something which costs them money every month, which they owe more on than it is worth, and which they cannot sell sans other financing or TRUE assets being absorbed into the 'money pit'
I'd HARDLY call that an asset!
Quote:
Originally Posted by user_id View Post
but since the mortgage is a secured debt he must pay off the mortgage when he sales the home. Being underwater doesn't change this picture at all, in the case of being underwater the seller needs to come up with additional funds beyond what he received for the home.
THat does EVERYTHING to change the picture, as I have described several times and in the passage above.

Quote:
Originally Posted by user_id View Post
The details here are actually very important and the IRS sees it just as I described, they don't see it as you are describing it. For example, let's suppose that you purchased the home for $200k and owe $400k on it (pulled equity out). Now you need to sale, but the home can only sale for $350k. Here the transaction occurs just as I described above, the seller will receive the $350k and since they paid $200k the remaining $150k will be considered capital gains for tax purposes. But its a secured debt, so the seller has to come up with an additional$50k beyond the $350k he got for the home to satisfy the mortgage.
Lets take another situation: Lets just say that (Going with the ORIGINAL statistic, and not intentionally trying to throw a meaningless scinario in there and saying "See"):
That we owed our 'extra' $50K.

IF it were 'forgiven' and we did not have to come up with it (For whatever reason)... the IRS (Since you want to drag them into it) would TAX that 'debt forgiveness'

...While you had nothing.

-Now, that's what you said, more or less. but what you are ignoring (Trying to use the IRS to muddy the waters) is that the IRS and the government does MANY things which are not only mathematically impossible, but are also illegal and unconstitutional.

Take our (Admitted) 14 trillion debt for instance, which has more than doubled in the last 10 years. (Actually it's MUCH more than that, but it's hidden through double book keeping which would make Enron proud)
-My point here... You can't use the ever changing Government/IRS to prove a economic point. they make their own economic reality.

An asset is NOT something which COSTS you money.
BOTTOM LINE.




Quote:
Originally Posted by user_id View Post
Now, I'm sure you'll rant some more. But I have sufficiently explained matters so I'm done.
To the contrary. You have worked HARD at answering NOTHING.
(Not that I expected more)
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