[travisjungroth]

A company buys a balloon making machine for $100k. They use the machine and depreciate it over the years to $20k, getting $80k of deductions over the years. They decide to stop making these balloons. Someone offers them $1k but they decline. They destroy the machine, and have a $20k loss on their taxes.

This is all above board, totally normal behavior. There are reasons to be against destroying these movies, but tax fraud really isn’t one of them. They actually did take the loss of whatever was the remaining value of that asset.

[Dylan16807]

But why wouldn't they sell it for $1k and then have a $19k loss to deduct?

And how do we encourage them as much as possible to take that option?

[travisjungroth]

Maybe the reason they stopped making them is the balloon got a negative connotation and was hurting their brand. I dunno, a disgraced celebrity. Selling the machine for others to make it hurts them (even under another brand). Maybe the offer was only $100 and it’s not worth the time.

[ok_dad]

They used the machine here, and depreciation rules mean you can do that, but most companies will still try and keep using a machine until it’s no longer working for that process, whether or not it was depreciated fully. Also, I expect there are different time windows for dormant equipment depreciation and while laptops might depreciate in five years I doubt industrial equipment does at the same rate.

[travisjungroth]

The motivation to stop using the machine wouldn’t be deprecation but just some external business reason. You can also change the deprecation schedule and the numbers, the idea is the same.

The overall point is I don’t think it’s rare to destroy an asset that you could sell, and to take a deduction for that. Comments were calling that fraud.