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Roll Back Fleet Cost with CMAES

1031 Exchange Services - Transportation And Equipment Exchanges

Roll Back Fleet Cost with CMAES

When businesses buy and sell capital equipment, sometimes an obvious step in the process is overlooked.

  1. The sale of business assets results in taxable gain to a business.
  2. If a business purchases assets in the same year, depreciation rules permit a portion of the taxable gain to be offset by the depreciation deduction. The amount of taxable gain varies from 97.5% to 65% in taxable gains.
  3. The taxes paid in the year of sale are often overlooked in the financial analysis of buying and selling equipment because most analysts combine all depreciation deductions in the year of sale even though it may take anywhere from 4 to 8 years to actually receive all of the tax benefits.
  4. The company borrows funds to replace the funds used to pay income taxes in order to purchase more property.

Continuous Multi Asset Exchanges (CMAES) can avoid these negative tax consequences, as well as reduce income taxes, interest, debt and income taxes paid on operating income used to pay for these items as well as reduce the overall cost to reinvest in productive equipment. The 97.5% to 65% in taxable gains not offset by depreciation deductions is eliminated by CMAES. This tax strategy has been approved by the Internal Revenue Service since 1990.

A business has two options:

  1. Use the CMAES cost savings to reduce debt expense. This results in a total lower cost for equipment in the range of 65% to 68%.
  2. Use the CMAES cost savings to reinvest in additional equipment. Reinvest in additional equipment and using the additional income generated to reduce debt results in a dramatic reduction of the cost of equipment as illustrated below.
 
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