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Stupid arguments about the Ground business model
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<blockquote data-quote="dmac1" data-source="post: 4748225" data-attributes="member: 60252"><p>You do know that if you sell fully depreciated assets, it counts as income and you need to pay taxes on the sale? So if you have fully depreciated a vehicle, and sell it, and don't declare the income, you are violating tax laws. And if tax laws change- as they do- you could owe 25% or moreof your sale price as tax. So you might need to sell your 'business' for at least 25% more than you paid just to break even.</p><p> </p><p>Just a reminder for prospective purchasers. And if you buy a business that made good cash flow in large part due to generous depreciation tables, once your assets are fully depreciated, you will see a drop in cash flow. Cash flow is not always an indication of true income and you should not value a purchase based on cash flow without fully understanding tax law. If you have an asset you depreciate over 7 years, with the cost being $70000, and have 6 of those assets, depending on your tax bracket, after 7 years, your income could suddenly drop by $15,000 per year. Hopefully, the assets would still have some useful life left, and you won't be making payments any longer.For a buyer, knowing the depreciation already taken could be an important consideration when a contractor claims a 'positive cash flow' of a cetain amount, even if the positive cash flow is provable. Cash flow can be manipulated- just like statistics.</p></blockquote><p></p>
[QUOTE="dmac1, post: 4748225, member: 60252"] You do know that if you sell fully depreciated assets, it counts as income and you need to pay taxes on the sale? So if you have fully depreciated a vehicle, and sell it, and don't declare the income, you are violating tax laws. And if tax laws change- as they do- you could owe 25% or moreof your sale price as tax. So you might need to sell your 'business' for at least 25% more than you paid just to break even. Just a reminder for prospective purchasers. And if you buy a business that made good cash flow in large part due to generous depreciation tables, once your assets are fully depreciated, you will see a drop in cash flow. Cash flow is not always an indication of true income and you should not value a purchase based on cash flow without fully understanding tax law. If you have an asset you depreciate over 7 years, with the cost being $70000, and have 6 of those assets, depending on your tax bracket, after 7 years, your income could suddenly drop by $15,000 per year. Hopefully, the assets would still have some useful life left, and you won't be making payments any longer.For a buyer, knowing the depreciation already taken could be an important consideration when a contractor claims a 'positive cash flow' of a cetain amount, even if the positive cash flow is provable. Cash flow can be manipulated- just like statistics. [/QUOTE]
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