A misconception or laziness on the part of accounting...

If it's a small business, there's a chance it's already taken as expense in the 
lump sum one is allowed up to a certain amount (I forget the figure now - many 
thousands). Otherwise, if it's old (10 yrs or more) it is probably all 
depreciated away (tax deductions taken), and if it's a really lazy acct dept, 
then they may not even argue it's depreciation and take the IRS tables which 
may claim it has up to a 20 yr life. In that case, less than half of its value 
is on the books. WHOEVER they sell it to, they claim the difference for taxes, 
as long as the person buying isn't the one in mgmt setting the price and 
playing "Let's Make A Deal" with himself....

Now, if it's all depreciated, they have to claim income on any sale proceeds. 
There is motivation to give it away. You have to deal with 'fairness' then.

If it has value still on the books, They can sell it for that (but that's an 
artificial number and not a real value), they can sell it for that times their 
tax rate (they break even bottom line if that's the concern), or if they sell 
it for less, the difference is the writeoff by definition. Any sale brings in 
more than the writeoff alone, since the income offsets the percentage tax rate. 
If it's on the books for $100 and they have a 40% tax rate, then the writeoff 
is worth $40 to the bottom line. If they sell it for $100, it's moves things 
around the bottom line and brings in $100 non-taxable. If they sell for less 
than $100, they benefit between $40 and $100. As you see, writeoff is the 
lowest value back.

The only IRS complaint might be that the 3 yr old HP spectrum analyzer isn't 
really worth $1 and would consider the difference between real value and what 
you paid to be 'income', since you also work for them. The company still writes 
it off. However, this is a trivial detail, and unless you're really moving a 
lot of goods and it's flagrant, there's bigger fish they want. Some 
justification is all that may be needed to set it's value, since it could have 
been dropped, etc.

To be totally covered, they should have listed all the equipment to be 
discarded, then if they are going to sell, get recycling quotes. They can use 
that for fair market value setting, and sell to employees, perhaps in a lottery 
or fist-come basis. If they just take it to the dumpster, then they can also 
just put it in a covered area, announce that it's at the 'virtual' dumpster, 
look the other way, and discard what isn't taken at week's end.

It's also possible to internally recycle it. For instance, if it's depreciated 
already, it's off the books already, so they can pile it up and let other 
departments grab at it that might not have the budget for a brand new whatever, 
but having a 10yr old whatsit-scope is better than having none. The benefits 
are increased ability in other departments, less cost, etc, but it's a 
management/leadership thing, not an accounting one.

As you can see, it can provide liquidity by selling and it doesn't affect tax 
treatment. Simply throwing it away and writing it off is the least beneficial 
financially for them. It's usually an accting dept that's lazy, doesn't 
understand the business, or it's too small of a deal for them to take up the 
cause. I suggest you present how it benefits the company as well, and how to do 
it, and if presented at a high enough level, it'll change. The only 'legal' 
issue is that you aren't the one that buys, sells, and sets the price. The rest 
is just numbers.

There is just one other possibility - the guy hauling it all away today MAY 
have a relationship with the boss already, and THAT'S why it's done the way 
it's done... ;) It happens...


alan smith wrote:
> personal experiance.....they do it for a tax writeoff....if they allow it to be salvaged, then they can't leagally write it off. 
>    
>   Sorta sucks....
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