GAA election: A valuable tool for tangible property depreciation
Most taxpayers aren’t familiar with a General Asset Accounts (GAA) election, but it can prove very beneficial for tangible property depreciation.
A GAA is designed to accommodate an acquisition of a group of similar type asserts, with similar useful lives and a similar depreciation method, however, the taxpayer would not have to separately enter each asset.
For example, if you purchase 50 desks, you would only depreciate one asset on the depreciation schedule. Once this election is made, the “basis” in the assets for later disposition is $0. So, if the asset(s) are soon sold, the profit reportable is the total sale price. The asset will continue to be depreciated even though it no longer exists.
The interesting side of a GAA election is when a taxpayer purchases a building with the intent to demolish it. The cost of the building is still depreciable, even if it is bought and soon torn down. The building will continue to be depreciated even though it’s long gone. Instead of no write-off for a demolished building, only a higher land value, a GAA provides a way for the taxpayer to write off this building.
For more information on how to use a GAA election to your benefit, contact a ShindelRock tax professional today.