AAA examples in Tax Book

[taxxcpa]

In the Tax Book the S-Corp examples always show tax depreciation and book depreciation as the same which makes Retained Earnings and the AAA the same.

I couldn't understand why the depreciation differences weren't included on Schedule M-2 until I finally figured that variance were due to timing differences which would ultimately offset when all assets are fully depreciated.

I would like to recommend that future examples illustrate the effect of using MACRS for taxes and using GAAP or SL depreciation for book depreciation.

[Bees Knees]

MACRS is an acceptable depreciation method for keeping track of AAA in an S Corporation. Why in the world would anyone want to complicate an S corporation return further by using SL or GAAP for bookkeeping purposes? Are there not enough new tax laws out there for you to keep track of?

[Snaggletooth]

Reference Book Protocol

Taxxcpa -

Part of the protocol in writing a reference book is to present the subject matter without
introducing other issues which may obscure the effect of what is being shown. This becomes even more pronounced when a jam-packed version of TTB is produced, and space is at a premium.

As a CPA in real-world situations, you often encounter mixed issues which do complicate the task at hand. The one you present mixes the concept of balance sheet treatment of deferred income taxes, timing differences on book-to-tax depreciation, and AAA. The issues are entertwined, but each issue stands on its own.

Short fiscal years are another one quite frequently encountered. There is a section in TTB dealing with short tax years, but could you imagine how big the book would be if examples in the other sections were presented in short fiscal years?

Simply put, TTB is a tax book and makes no claim to be a GAAP book. I occasionally have to deal with book-to-tax issues myself, so I appreciate reading posts from CPAs such as yourself. But reading any reference book I expect clear definition not to be obscured and think they have done a good job.