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Old 04-06-2017, 10:07 AM
guywhoasks guywhoasks is offline
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Moved inventory to a fixed asset account

For the 179 tax. Moved $500,00 of inventory over to a fixed asset account.

The accountant says not to transfer back into inventory and just have any future sales of those items come out of the fixed asset account. Problem is: the invoice does not "see" the fixed asset account and so it just looks like there is no inventory.

Is it possible to allow the invoices/estimates point to more than one asset account? Or am I gonna have to create new items for each of these, where their asset accounts point to the fixed asset account? That seems to work, it's just gonna end up erasing any history of the item, since it would mean a new "Item Name/Number". I can't just change the asset account to the existing item name because in most cases, it's only a few qualifying items that were purchased last year.
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Old 04-06-2017, 04:53 PM
Lorin Browning Lorin Browning is offline
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First, it doesn't belong in the Fixed Asset section of the chart of accounts. Do you really intend to start taking depreciation on each individual item? Are you assigning a class life to each item? And then reporting the sale of each item on Schedule D?

Second, the mere task of taking it out of inventory automatically results in an increase in cost of goods for the period.

I assume that you were trying to show some sort of write-down in the value of certain items in inventory.

One very viable procedure is to follow the advice given in:
Lorin Browning, Ph. D.
Fellow -- National Tax Practice Institute
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Old 04-06-2017, 06:30 PM
Lorin Browning Lorin Browning is offline
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After posting, I re-read your post.

Your first sentence refers to "the 179" tax.

Are you referring to IRS Code Section 179 whereby one can take an expense deduction on certain properties used in a trade or business during the first year the property is placed in service?
  • If so, that is not a tax.
  • If so, not all property qualifies for 179 treatment. I seriously doubt that inventory qualifies.
Lorin Browning, Ph. D.
Fellow -- National Tax Practice Institute
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Old 04-07-2017, 06:00 AM
Rustler Rustler is offline
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Location: Texas - The Republic
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@ guy

Why are you doing that?

Inventory can not be depreciated, section 179 is depreciation.

If you are just doing it for the expense, and your accountant goes along with it, an auditor is going to have a field day. I can't imagine an accountant being ok with this.

A fixed asset is something that has a long life expectancy, and can be depreciated ONLY if used in the business.

Section 179 is FIRST year depreciation on top of all that, it can only be taken when the fixed asset is first purchased, even if you could depreciate inventory did you buy it all in 2016?

Consider the actual income tax return
179 depreciation $500,000 expense
COGS is calculated
Last year ending inventory value + purchases - ending inventory value = ending inventory value is at least 500K less since you took out that much, so now there is an additional $500,000+ expense

$1,000,000+ combined expense???
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Old 05-05-2017, 12:14 PM
ssm0006 ssm0006 is offline
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Smells like tax fraud.
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