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Discussion Forum Index --> Accounting Questions --> Income Tax Basis reporting of Section 179 when loss is created
Jdugancpa (talk|edits) said:
| 3 November 2006
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| For income tax purposes, Section 179 depreciation cannot be taken to create or increase a loss. But it may be elected and carried over to future years. If reporting financial statements on an income tax basis, should the depreciation expense in the financial statements include or exclude the disallowed Section 179 depreciation? If included, the result will be a loss on the financial statements that does not agree to the net income shown on the tax return.
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PDXCPA (talk|edits) said:
| 7 November 2006
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| If you are not going to report F/S according to GAAP then I'd say you do whatever you want. Hence the reasoning for sticking to GAAP financials. Tax matched financials is not GAAP.
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Jdugancpa (talk|edits) said:
| 7 November 2006
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| GAAP is irrelevant since the engagement is to report on the income tax basis of accounting. Reporting based on an "other comprehensive basis of accounting" (OCBOA) does not provide me license to do whatever I want. Although I find nothing authoritative on the issue, based on a telephone consultation with the AICPA Technical Hotline I have concluded that the financial statement depreciation should be the "allowed" depreciation, since the disallowed Section 179 will not be currently deductible but will fall into the next year when taxable income permits the deduction. I will disclose the election and the disallowed Section 179 in the tax footnote.
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