Depreciation

While gasoline prices are drawing new attention to the cost of driving, more and more consumer organizations are offering drivers help in calculating the total cost of their cars and urging them to consider the whole package when buying. Insurance premiums, for example, vary not only by the value of the car but also by its safety record. Depreciation, the difference between what you paid for the car and what it's worth when you sell it, is a direct loss.

Normally, the value of a new car plunges as it's driven out of the dealership by its new owner. But slumping auto sales and leases in recent years have changed that axiom by creating a shortage of late-model-year used cars, according to auto price information company Kelley Blue Book. The average value of a 1- to 3-year-old used vehicle has increased from $15,000 in 2008 to more than $23,000 in 2011, an annual average increase of nearly 16%, Kelley analysts said. They expect used-car pricing to remain strong because it will take several years of strong new-car sales to replenish the shortage of used vehicles that is pushing prices up now. "While depreciation typically affects a vehicle's value most in the first two years of ownership, it will not be as pronounced as it would have been a few years ago when the used-car supply was still very high," said Alec Gutierrez, manager of vehicle valuation for Kelley Blue Book.

Time-shares may be a great way for vacationers to save money--allowing them to forgo high-priced hotel rooms--but they may be less of a bargain in other ways. A big problem with time-shares as an investment is their rapid depreciation--sometimes as much as 50% to 75% in just a matter of weeks. This is largely because time-share companies drastically mark up the prices of new offerings to pay for sales and marketing costs.

The business community likes President Obama's proposal to accelerate tax write-offs for companies buying equipment and other big-ticket items. But it is clamoring for more — extension of all of the soon-expiring Bush-era tax cuts. Obama will tout the write-offs Wednesday when he unveils a $180-billion stimulus package. But he isn't likely to back down on his stand on continuing the marginal tax rate cuts only for households and businesses earning less than $250,000, analysts said.

In his complaint about double dipping, Shigeo Yuge shows that he doesn't understand the tax impact of depreciation (June 9) referring to an "Apartment Life" column. If depreciation resulted in an equivalent tax credit, then his point would be valid. However, depreciation only gives a tax deduction. By the time a carpet has been fully depreciated, someone in a combined federal and state tax bracket of, say, 42% has only saved enough to pay for 42% of the replacement carpet. The other 58% will come out of the landlord's pocket.

Pacific Telesis to Take $3.3-Billion Charge: San Francisco-based Pacific Telesis Group said it will take the charge in the third quarter to more quickly write down the value of equipment as it faces competition in a deregulated California phone market. Pacific Telesis becomes the sixth of the nation's seven regional Bell telephone companies to change accounting to allow faster depreciation of equipment and facilities. The Bells are being challenged for the $90-billion-a-year U.S.

The business community likes President Obama's proposal to accelerate tax write-offs for companies buying equipment and other big-ticket items. But it is clamoring for more — extension of all of the soon-expiring Bush-era tax cuts. Obama will tout the write-offs Wednesday when he unveils a $180-billion stimulus package. But he isn't likely to back down on his stand on continuing the marginal tax rate cuts only for households and businesses earning less than $250,000, analysts said.

Your recent article, "Tax Law Helps Utilities but Stirs Refund Dispute," (June 26), was correct on one major point. Utilities are allocating to customers taxes previously collected but no longer owed to the Treasury due to the recent change in the tax law. However, there were inaccuracies in the article which should be corrected. Most importantly, customers are getting the benefit of this money now. First, money which has been earmarked for the so-called deferred tax account is being used right now by utilities as a direct reduction in rate base--the base upon which rates are set. Utilities do not earn a return on these funds.

Congratulations on Dick Turpin's Dec. 1 column, "Trends: Fewer New Families." It really is due time that potential buyers, sellers and the real estate industry in general become a bit more attuned to what is actually happening in residential home sales. Living in a middle- to upper-class suburban area, a "bedroom community" bordering Los Angeles on its northwestern edge, I've become aware of situation after situation involving actual "depreciation" of residential properties. Of course, we know that the land itself does not go down in value, but the over-inflated spiral of prices on residential property--particularly resales--is already beginning to bottom-out in many areas.

"Verizon's Deferred Tax Liabilities Too High?" (Jan. 20) includes comments from uninformed sources whose broad answers to hypothetical questions are used to impugn Verizon Communications Inc.'s accounting for deferred taxes. Verizon has several categories of deferred taxes that affect the timing of tax payments. For example, to incent infrastructure investments and create jobs, U.S. tax law gives companies the flexibility to accelerate depreciation expenses, for tax purposes, rather than spread these expenses out evenly over time.

Dear Karen: How will the federal stimulus affect my small-business taxes this year? Answer: If your business had a loss last year and you make less than $15 million in annual revenue, you can take advantage of a stimulus provision that extends loss carry-back provisions to five from two years. "This means profits your business made up to five years ago, on which tax was paid, can now be claimed back" if you had a loss in 2008, said Chas Roy-Chowdhury, head of taxation for the Assn.

Jocelyne Aposaga is a hairstylist who relies on tips for about 20% of her income. As the economy slumps, she has a new survival plan: cut tips. When Aposaga eats out, she leaves servers a buck or two less than last year. It's not the service that's bad, it's the economy -- and a case of what goes around comes around. "I am just not getting paid as much as I used to. It's not because I am spending more money on gas or other things," said Aposaga, who works at Aderon Salon in Pasadena.

"Verizon's Deferred Tax Liabilities Too High?" (Jan. 20) includes comments from uninformed sources whose broad answers to hypothetical questions are used to impugn Verizon Communications Inc.'s accounting for deferred taxes. Verizon has several categories of deferred taxes that affect the timing of tax payments. For example, to incent infrastructure investments and create jobs, U.S. tax law gives companies the flexibility to accelerate depreciation expenses, for tax purposes, rather than spread these expenses out evenly over time.

While gasoline prices are drawing new attention to the cost of driving, more and more consumer organizations are offering drivers help in calculating the total cost of their cars and urging them to consider the whole package when buying. Insurance premiums, for example, vary not only by the value of the car but also by its safety record. Depreciation, the difference between what you paid for the car and what it's worth when you sell it, is a direct loss.

On Fan Appreciation Day Sunday, it was the Dodgers who won the grand prize. The San Francisco Giants awarded them a junior varsity lineup and a freshman starting pitcher, and the Dodgers beat the acne out of them. Three consecutive home runs in the fourth inning. Six consecutive scoreless innings by the bullpen. A 61st consecutive save for the hockey guy. The final score was 7-5, and the final impression is that the Dodgers are still alive in the wild-card race, but wait a minute.

Just last year, Tyrone Valoyi earned more than enough as an electrician to feed his wife and seven children a hearty dinner of chicken and gravy several times a week. He still has his job, but now they are lucky to get meat once a month. Skyrocketing food prices over the past year have forced many South Africans who once made a decent living to struggle to feed their families.

Regarding "Real Estate vs. Stocks: Which is Better," no argument when you buy rental property so that the rents always cover the debt service and you have tax benefits from the debt service and depreciation. However, one gives up liquidity to own real estate, which makes it sometimes totally out of the question for retirees, small pension plans, etc. Also, if the rents don't cover the cash flow or are interrupted, you have negative cash flow. That's like buying IBM stock and paying them the dividend while you hope it goes up in value.

Re "False Advertising," editorial, Oct. 22: While I agree with your assessment that both the Republicans and Democrats have offered more pork than stimulus, your suggestions of increased unemployment benefits, food stamps and "tax rebates" (how does someone receive a "rebate" on taxes he never paid?) are also lacking. None of this will create one job. I think we should propose accelerated depreciation on new purchases for a specified time to give individuals and corporations an incentive to spend money and create new jobs.

Flight attendant Naoko Kanbara has to keep a close eye on arrival and departure times and flight numbers for her job. One number she doesn't like these days is 131-- the number of yen it takes to buy a dollar. The sharp weakening of her native currency in the last two weeks has suddenly made it a lot more expensive to buy anything overseas. "I fly to San Francisco tomorrow, and seeing the yen above 130 is a real shock," Kanbara said.

Argentina's interim government gave the first sign Wednesday that it was preparing to abandon a decade-old policy of keeping the peso valued at one U.S. dollar, and shopkeepers started raising prices to hedge against an almost certain devaluation.