SBFM2000: Tax Savings from Depreciation Appears for Non-Depreciated Asset

• Microsoft Small Business Financial Manager, included with:
  • Microsoft Office 2000 Small Business Tools

SYMPTOMS

When you create a Buy vs. Lease Analysis Report, an amount for tax savings from depreciation appears on both the loan worksheet and the cash flow comparison worksheet, even though you are not depreciating the asset.

CAUSE

This problem occurs when you do all of the following:

• You create a Buy vs. Lease Analysis Report.
  
  -and-



• In the Asset Depreciation Information dialog box, you select the Do Not Depreciate Asset (Such as Land) check box.

STATUS

Microsoft has confirmed this to be a problem in the Microsoft products listed at the beginning of this article.

MORE INFORMATION

The Microsoft Small Business Financial Manager allows you to create Buy vs. Lease Analysis Reports and what-if scenarios. These types of reports let you evaluate alternative financing methods for buying assets.

When you create a Buy vs. Lease Analysis Report, an amount for tax savings from depreciation appears on both the Loan worksheet and the Cash Flow Comparison worksheet. This tax savings appears for the life of the asset.

This tax savings is the purchase price, multiplied by the income tax rate, divided by the life of the asset, divided by the depreciation method multiplier. For example, given a purchase price of $1,000.00, an income tax rate of 30 percent, and an asset with a life of five years, if you use straight-line depreciation (SLN), the tax savings would be as follows:

(1000 x .30) /5 / 1 = $60

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