This is topic Valuing Equipment for the county assessor in forum Film Handlers' Forum at Film-Tech Forum ARCHIVE.


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Posted by Mike Frese (Member # 4361) on 06-26-2010, 03:28 PM:
 
My county assessor has given me an interesting project. Even though I paid nothing for some of the equipment that I am using (came with the lease of the building); I still must report and assign a value for it when it was put into use.

So what I have:
Simplex xl (model pr-1003) x2
sh1012
sh1000
Eprad Universal lamphouse model 47300
SPECO 4 deck platter
Old very heavy simplex bases x2

The lamphouses were probably bought new as they are serial numbers 507 & 508. Everything elses I am going to assume was used ???

1979 was the opening of the theater.

I will probably print out this thread to show the assessor, Even though some of the equipment is decades old, it will carry a 10% valuation for as long as the equipment is used.

Thanks for your help.
 

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Posted by Martin McCaffery (Member # 37) on 06-26-2010, 04:49 PM:
 
I'd check with your accountant as the laws from state to state vary, but it seems to me a standard depreciation on your equipment would render them worth zero at this point. Do you still depreciate them on your taxes?
 

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Posted by Mike Frese (Member # 4361) on 06-26-2010, 05:07 PM:
 
Martin,

According to the assessor, the equipment will never be valued at zero (state law changed in the past couple of years). Any equipment used will always have a assessed value of 10% of its original cost. So if the equipment was $10,000 back in 1979, it will carry an assessed value of $1,000 for as long as it is used.

Since I paid nothing for it, I do not depreciated at all on my taxes.
 

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Posted by Louis Bornwasser (Member # 3063) on 06-27-2010, 08:08 AM:
 
Mike; usually state law follows Federal law regarding depreciation. Everything is zero after 7 years.

Maybe the tax on $1000 is not so bad? Louis
 

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Posted by Martin McCaffery (Member # 37) on 06-27-2010, 09:39 AM:
 
I guess the question then comes down to is each piece of equipment valued at $1000 (projector, soundhead, stand, lamphouse, etc) or the whole system?

Talk to an accountant

Punchline to only known accountant joke: "How much is two plus three?" "How much do you want it to be?"
 

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Posted by David Stambaugh (Member # 1102) on 06-27-2010, 10:58 AM:
 
It's the same here. There's a Lane County tax on business property, all physical assets, and they never depreciate to zero.

EDIT: I looked up the info for Lane County, found this:

Taxable personal property

All personal property is, by law, valued at 100 percent of its real market value unless exempt by statutes. Personal property is taxable in the county where it is located as of the assessment date, January 1 at 1 a.m.

Taxable personal property includes machinery, equipment, furniture, etc., used previously or presently in a business (including any property not currently being used, placed in storage, or held for sale). Examples of taxable personal property:

Amusement devices/equipment.
Noninventory supplies.
Barber and beauty furniture/equipment.
Garage and service station tools/equipment.
Leased equipment.
Medical equipment.
Movable machinery, tools, and equipment (such as logging and construction equipment, lift trucks, and equipment used in service industries).
Office furniture/equipment.
Store furniture/equipment.
Libraries such as repair manuals, electronic media, compact discs, videos, tapes, sample books, law books.
Fixed load/mobile equipment.
Floating property.
 

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Posted by Randy Stankey (Member # 64) on 06-27-2010, 11:08 AM:
 
Sell the equipment to somebody else and rent it back from them.

Not only will you avoid paying taxes on the assets, you can deduct the cost of the rental as a business expense!



Okay... That probably won't work but it certainly is a fun thought!
 

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Posted by Mike Frese (Member # 4361) on 06-27-2010, 11:47 AM:
 
An accountant will not know what this stuff could have been bought for in 1979. Sounds like this could be an impossible project. My thought would be that, if anyone had a clue what this stuff might have been bought for, it would have been you guys.

FWIW, the CPI was 1/3rd in 1979 of what it is now.
 

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Posted by Mitchell Dvoskin (Member # 751) on 06-27-2010, 04:49 PM:
 
Simplex XL would have already been a used item in 1979.
 

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Posted by Chris Slycord (Member # 4239) on 06-27-2010, 05:27 PM:
 

quote: Randy Stankey

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Not only will you avoid paying taxes on the assets

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But you would on the sale...
 

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Posted by Richard Hamilton (Member # 321) on 06-27-2010, 06:14 PM:
 
In 1982 Eprad Universal lamphouse model 47300 had a new updated list price of $2330. Some of the drawings in the manual are dated 1974 and 1976 with a service bulliten dated 1979, so it is possible it was purchased used at a much lower price.

Rick
 

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Posted by Martin McCaffery (Member # 37) on 06-27-2010, 06:25 PM:
 
I just reread your original post. You're being taxed on leased equipment?

You say it came free with the lease of the theatre. You don't own it, you lease it. Why are you being assessed and not the person who owns the theatre? Was ownership of the equipment actually transferred to you upon signing a lease?

I know, you started off with a simple question...
 

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Posted by Dustin Mitchell (Member # 372) on 06-27-2010, 06:34 PM:
 
I've taken about a years worth of accounting courses so my opinion isn't exactly gold here, but you don't necessarily value items at the value you bought them for; for purposes of accounting an item is usually valued at what it was acquired for. In the case of a donated item the value would typically be the fair market value at the time of donation, not the time of original purchase. So if your projector was worth $1,000 when you acquired it that's where you'd start your own depreciation.

But, I'm probably wrong about all this, I haven't gotten into a lot of the higher level accounting stuff yet. I do know that the rules for depreciation where it pertains to income taxes are different than many GAAP (Generally Accepted Accounting Principles) rules but I thought the difference was in how much was depreciated each year, not in determining the base value of the asset.
 

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Posted by Mike Frese (Member # 4361) on 06-28-2010, 01:20 AM:
 
Martin,

The first lease I signed with the property manager included a list of equipment that belonged with the porperty. The property manager's son made the list as we walked through the theater. The second lease I signed 18 mos or so later did not include that list.

Fast forward to today: The property manager and I have some issues. One of his issues was the property tax issue arising when the assessor came calling last year. I told the assesor that some of the equipment came with the building and was not mine. 7 mos later the property manager claims all equipment in the building is mine otherwise if any it is their's they will come take it out.

The property manager screwed up and is trying to cover his butt. Obvisously the equipment has some use to me and I do not want him to pull it out. So since the equipment is mine and I gave no consideration for it, according to the assessor I must do this little project.

As far as normal accounting rules go......they do not apply here. Government needs money.
 

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Posted by Dustin Mitchell (Member # 372) on 06-28-2010, 01:30 AM:
 
Yes, but you still don't depreciate stuff based on the value it was purchased at by someone else, you depreciate based on the value you acquired it for or perhaps fair market value. To give an example, when you buy an income property from someone who has already depreciated it to $0 or whatever the base is (the building, not the land since land doesn't depreciate) the depreciation is reset. Its just the way these things work...mostly. Like I said there are lots of rules and differences between GAAP and tax depreciation.

You really need to talk to an accountant first and then you can ask FT what the stuff was worth in 79 (probably not) or what it was worth when you 'acquired' it. Given the extra information in your last post I'd also get the property manager to put the fact that the equipment has been transferred to your ownership in writing.
 

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Posted by Dustin Mitchell (Member # 372) on 06-28-2010, 04:33 AM:
 
Since I can't sleep and I'm bored:
http://www.dat.state.md.us/sdatweb/ppbooklet_2010.pdf
There's the booklet that deals with your question. Never mind that the first part of the title says 'Personal Property Return', if you read on its all about business assets and property.

Page 4 states the following:

quote:

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Furniture, fixtures, tools, machinery and equipment not used for manufacturing or research and development. State the original cost of the property by year of acquisition and category of property as described in the Depreciation Rate Chart on page 4. Include all fully depreciated property and property expensed under IRS rules.

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quote:

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Property determined by the Department to have an expected life in excess of 10 years at the time of acquisition shall be depreciated at an annual rate as determined by the Department.

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At any rate, as said before, talk to an accountant, they'll be familiar with the rules and procedures.
 

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Posted by Mike Frese (Member # 4361) on 06-28-2010, 08:38 AM:
 
Dustin,

Sorry you could not sleep. I am in Missouri, not Maryland.

Again this is what the assessor told me: personel porperty used in a business will never be depreciated to zero and have a $0.00 assessed value. Assets (at least in my case he said) will maintain a assessed valuation of 10% for as long as it is used in business. This, of course, is a significant difference to how assets are handled for financial and managerial accounting.

Since, I paid no consideration for the equipment, the valuation rests on what the equipment would have cost in 1979. He said that he would accept any reasonable estimate of value. For example, he said he would be skeptical if I said $1,000.

Again, no accountant needed here unless the accountant knows the value of theater equipment in 1979.

I do have it in writing that the property manager considers the equipment mine.

Thanks for everyone's help. I am doing what the assessor wishes for me to do. Which is - assign a value to this equipment when it was put in place in 1979.
 

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Posted by Martin McCaffery (Member # 37) on 06-28-2010, 08:43 AM:
 
Of course, it is possible the assessor is completely wrong
 

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Posted by Louis Bornwasser (Member # 3063) on 06-28-2010, 01:52 PM:
 
Good advice, Dustin. Louis
 

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Posted by John T. Hendrickson, Jr (Member # 849) on 06-28-2010, 02:23 PM:
 
To simplify matters and satisfy the assessor, get the list prices for the equipment for the year 1979. The manufacturers could probably help you there. Then, take 10% of that. Done.
 

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Posted by Scott Norwood (Member # 30) on 06-28-2010, 02:29 PM:
 
Two problems with that: no one pays list, and it sounds as if the equipment was already used in 1979.

Maybe try to find some used equipment price lists from 1979?
 

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Posted by Dustin Mitchell (Member # 372) on 06-28-2010, 07:18 PM:
 
Oops! MO not MD, bit of a difference....

As a note, even in Financial/Managerial accounting you don't always depreciate something to $0, things usually have a salvage value. Not always of course.

I don't know, don't you have an accountant to take care of your day to day book keeping/taxes? I'm just really suspicious of the assessor telling you you have to depreciate based on the value someone else bought the item for, just doesn't make sense.
 

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Posted by Jeremy Weigel (Member # 4208) on 06-28-2010, 09:18 PM:
 

quote: Mike Frese

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The first lease I signed with the property manager included a list of equipment that belonged with the porperty. The property manager's son made the list as we walked through the theater. The second lease I signed 18 mos or so later did not include that list.

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