Reclassification
Business enterprises both invest and borrow large sums of money. The common factor in these two types of transactions is the time value of money.

Rev. Proc. 2002-9 along with the 2002 and 2003 tax acts, provide taxpayers an opportunity to obtain large tax deductions in the current tax year.

The charts below illustrate a $2,000,000 property reclassification under revenue procedure 2002-9

 

2,000,000 Reclassification to a 7 year lifeNEW PURCHASE

The following graph illustrates the future tax benefits of assets placed into service in the current year. $2,000,000 reclassed to a 7- year life.

*ATNPV $374,956.47

1st Year Tax Savings $103,192.00

2nd Year Tax Savings $175,408.00

3rd Year Tax Savings $119,408.00

4th Year Tax Savings $79,408.00

5th Year Tax Savings $50,928.00

*After Tax Net Present Value 6% Discount Factor Assuming a 40% Effective Tax Rate


 

2,000,000 Reclassification from 39 year life to a 7 year life.PURCHASED IN PRIOR YEARS

The following graph illustrates assets placed into service 7 years ago. $2,000,000 reclassed from 39-year life to a 7-year life.

*ATNPV $358,115.51

1st Year Tax Savings $645,288.00

*After Tax Net Present Value 6% Discount Factor Assuming a 40% Effective Tax Rate


 

Scarpello Consulting can help taxpayers take advantage of an opportunity to obtain large tax deductions in the current tax year.