Tax allowable depreciation — OpenTuition Forums

Aannette7y ago

Hi sir, normally when there is a project, say a project ending in 4 year, we would generally do a balancing allowance or balancing charge in the 4th year while closing out. Now say there is a project that is a continuing operation. That is, we are appraising the first 4 years, but the project is not ending in 4 years. So what do we do with the TAD that's on 25% reducing balance basis. We can not take a balancing charge or balancing allowance can we?

John MoffatTutor7y ago#1

Unless the question says otherwise, then you would just have the WDA in the 4th year and not a balancing charge or allowance.

Aannette7y ago#2

perfect, thankyou! Also, when issue costs are not tax deductible, there is no tax saving for issue costs in apv, right? Thanks

Aannette7y ago#3

There is this nagging question that has been destroying my npv since the beginning of afm studies. That is, when there is 10% TAD on machinery, and its straight line, they don't deduct the residual value and then apply the 10% charge. on the other hand when say its for 4 years straight line. They do deduct the residual value and then simply divide by 4. Why this difference? Thanks!

John MoffatTutor7y ago#4

Strictly for tax purposes, as you will remember from Paper TX (F6), the residual value is irrelevant when calculating TAD, even when for accounting its is straight line depreciation. For the exam, the examiner allows either, but as always state your assumption.

Aannette7y ago#5

thanks!!

John MoffatTutor7y ago#6

You are welcome :-)

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