Re:Supply Chain Shortages Continue Around the World. Get Use...
by OldTimeCoffee on Friday September 03, 2021 @07:39PM
(#28410648)
>No, when a company uses its revenues to buy stuff and hold onto it, the government counts the value of that stuff as profits
This is not quite right, though it is mostly correct in describing depreciation. When you purchase a depreciating asset it has a book value that is depreciated over time. That book value is not counted as income and definitely not as net income (profits), though it will appear with other assets on the balance sheet. You've essentially converted one type of asset to another, there is no gain or loss there to tax.
For depreciating assets, the depreciation is deductible because it represents a loss in value of the asset. In general, this can be taken when the depreciation is realized. If you dispose of the asset you pay taxes based on the deprecated value, like you've described.
It's important to realize that corporate taxes are almost exclusively on net income, that being the money left over after the business has done all of it's financial activities.
This is not quite right, though it is mostly correct in describing depreciation. When you purchase a depreciating asset it has a book value that is depreciated over time. That book value is not counted as income and definitely not as net income (profits), though it will appear with other assets on the balance sheet. You've essentially converted one type of asset to another, there is no gain or loss there to tax.
For depreciating assets, the depreciation is deductible because it represents a loss in value of the asset. In general, this can be taken when the depreciation is realized. If you dispose of the asset you pay taxes based on the deprecated value, like you've described.
It's important to realize that corporate taxes are almost exclusively on net income, that being the money left over after the business has done all of it's financial activities.