Matt Barrow wrote:
"Ron Natalie" wrote in message
m...
Matt Barrow wrote:

AIR, you have a reserve to pay a KNOWN FUTURE expense. This is distinct
from a CAPITAL account which is set aside to buy a CAPITAL ASSET in the
future.
That's all accounting practice, but it has no bearing in regard to taxes.
If you got money in the bank, it is an asset. If it derives
interest, it's income. It doesn't matter what you consider it to be
for use.
As one put it, this is different still from a sinking fund which is,
IIUC, how depreciation is handled when a depreciable item will have to be
replaced when it's useful life is ended.
None of which has squat to do with taxes.

Really? Depreciation is not a yearly write off against income?

I didn't say that. I said that it makes no difference that the money
you are banking in reserve is intended to counter the depreciatable
asset. It makes no difference tax wise whether you are banking money
to buy a second plane for your company or to replace the current one in
the case that it really does depreciate to zero value.