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Driller1 said he traded it in - it was not sold, no money was exchanged.
Which is a Like-Kind Exchange, which is a Nontaxable Exchange.
Anyway, I have no horse in this race. I do know what was allowed by our auditors and the IRS with our egg machinery years ago. Who knows what rules have changed since then.
There isn't a gain in the transaction if you paid a million for something and sold it for 300k. Ncole's point is if you wrote off 1mm in depreciation you'd have to account for the 300k you got for something you completely wrote down
Sure there is, because if you depreciate the property down to zero you've reduced the basis. You are correct in that gain in this case would entirely be depreciation recapture and thus characterized as ordinary income rather than capital gain.
That said, on a 1031 exchange one does not have to recognize gain (in general), assuming you use the proceeds to purchase similar property within a certain time frame. Since this is the intermawebz I'm not about to try and get into details of section 1031, even if I knew them all off the top of my head. Also, drilling in general has all sorts of little wrinkles that may not apply to other industries.
The upshot is that one can effectively put off gain recognition for a long time with some careful planning, and even when gain is finally recognized, they might be able to offset some of the recognition with depreciation from other assets.
All of this is a completely separate issue from claiming something as completely used for business when it's not, which apparently was the item you raised earlier in this thread.
I'd also include a Circular 230 disclaimer that I'm an idiot and you shouldn't trust anything I say, but apparently that stopped being required in the middle of last year. But I haven't stopped being an ignorant idiot, so there's that.
Driller1 said he traded it in - it was not sold, no money was exchanged.
Which is a Like-Kind Exchange, which is a Nontaxable Exchange.
Anyway, I have no horse in this race. I do know what was allowed by our auditors and the IRS with our egg machinery years ago. Who knows what rules have changed since then.
So you can fullyright off an asset say 1mm, trade it in on another 1mm asset only pay 700k out of pocket and writeoff another 1mm?
Eventually though you will have taken an amount equal to the basis in depreciation deductions. If the basis has depreciated to less than $300k and this is carried over to the next asset, then once your depreciation deductions on the new asset add to this amount, then you have to start paying taxes on that income from that point forward. (the IRS doesn't allow you to have a negative basis, right?)
This is no loophole in the tax code. In the long run, your total cashflow cannot be highly positive while your GAAP or taxable earnings are zero. In the short run, sure. But eventually the tax shield well runs dry, and you must pay the piper.
Like dieting, unless you are prepared to commit, and my feeling is you are not, then it would be a waste of their time and yours. You would just sling your list of excuses at them like you do us.
Instead of spending so much time trying to lower the water, you need to concentrate on raising the bridge , but you have not shown us one step in that direction. everything you post is about dumbing something down or lowering standards.
and our government doesnt lie to us every day? who cares if he is lying? he is taking the risk and doing us all a favor by avoiding giving more money to our politicians to dole about based on bribery.
This is the infectious cheater's mindset that created Greece. Do we want to emulate them? That's where this mentality takes us.
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