California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 7 - Net Income › Article 1 - Deductions › Section 24349(g) - ****** Accounting for Depreciable Property

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(1) Depreciable property may be accounted for
					 by treating each individual item as an account, or by combining two or more
					 assets in a single account. Assets may be grouped in an account in a variety of
					 ways. For example, assets similar in kind with approximately the same useful
					 lives may be grouped together. Such an account is commonly known as a group
					 account. Another appropriate grouping might consist of assets segregated
					 according to use without regard to useful life, for example, machinery and
					 equipment, furniture and fixtures, or transportation equipment. Such an account
					 is commonly known as a classified account. A broader grouping, where assets are
					 included in the same accounts regardless of their character or useful lives, is
					 commonly referred to as a composite account. For example, all the assets used
					 in a business may be included in a single account. Group, classified, or
					 composite accounts may be further broken down on the basis of location, dates
					 of acquisition, cost, character, use, etc.
(2) When group, classified, or composite
					 accounts are used with average useful lives an a normal retirement occurs, the
					 full cost or other basis of the asset retired, unadjusted for depreciation or
					 salvage, shall be removed from the asset account and shall be charged to the
					 depreciation reserve. Amounts representing salvage ordinarily are credited to
					 the depreciation reserve. When an asset is disposed of for reasons other than
					 normal retirement, the full cost or other basis of the asset shall be removed
					 from the asset and the depreciation reserve shall be charged with the
					 depreciation applicable to the retired asset. For rules with respect to losses
					 on normal retirements, see Reg. 24349(h).
(3) A taxpayer may establish as many accounts
					 for depreciable property as it desires. Depreciation allowances shall be
					 computed separately for each account. Such depreciation preferably should be
					 recorded in a depreciation reserve account; however, in appropriate cases it
					 may be recorded directly in the asset account. Where depreciation reserves are
					 maintained, a separate reserve account shall be maintained for each asset
					 account. The regular books of account or permanent auxiliary records shall show
					 for each account the basis of the property, including adjustments necessary to
					 conform to the requirements of Sections
					 24916 and
					 24917 and other provisions of law
					 relating to adjustments to basis, and the depreciation allowances for tax
					 purposes. In the event that reserves for book purposes do not correspond with
					 reserves maintained for tax purposes, permanent auxiliary records shall be
					 maintained with the regular books of accounts reconciling the differences in
					 depreciation for tax and book purposes because of different methods of
					 depreciation, bases, rates, salvage, or other factors. Depreciation schedules
					 filed with the tax return shall show the accumulated reserves computed in
					 accordance with the allowances for tax purposes.
(4) In classified or composite accounts, the
					 average useful life and rate shall be redetermined whenever additions,
					 retirements, or replacements substantially alter the relative proportion of
					 types of assets in the accounts. See example (2) in Reg. 24349(e) for a method
					 of determining the depreciation rate for a classified or composite account.
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****** This regulation is substantially the same as
						Section 26 CFR
						1.167(a)-7.