Scott Powerline and Utility Equipment recently implemented a
repetitive Like-Kind Exchange program (LKE or Section 1031 program) with Accruit,
the leader in LKE management for the equipment industry. This program generates
additional cash flow for our company and further facilitates our efforts to
ensure a steady flow of new equipment into the Scott Powerline rental fleet.
Given that, we thought if appropriate to offer a brief description of the
process and benefit.
An LKE program allows us to sell our rental fleet assets
and defer recognition of gain (and therefore tax) when the sales proceeds
are used to purchase more rental assets. The industry standard is to
depreciate equipment along an accelerated depreciation schedule;
reducing the tax basis to $0 in just over five years. Of course,
our equipment has a much longer useful life, so when we sell rental
fleet equipment, the market demands higher prices than our depreciated
basis. This gain (the difference between our tax basis and the sales
price of the asset) is then taxed at our corporate rate.
What does LKE mean for added cash flow? Consider
the difference between running a single asset through an LKE program,
and not:
With our Like-Kind Exchange program, we keep $26,312
working in our business from the sale of this asset. Across our
broad rental fleet, this amounts to a significant annual savings.
As another benefit, the forced reinvestment of these funds into our
equipment ensures that our clients receive the very best equipment
offered in the marketplace.
There are two small LKE-related changes which our
customers may notice. First when you purchase rental fleet equipment
from Scott, we may ask you to make your payments to Scott Powerline
Exchange, LLC. Accruit holds this account on our behalf for funds
associated with selling and purchasing equipment. Secon we now
include a notification on our invoices that references the inclusion
of certain assets in our LKE program. Tax code requires these simple
business process modifications.
Any assets you currently depreciate in the course
of your business may be eligible for an LKE program. If you are interested
in understanding LKEs in greater detail or are curious about the
benefit it affords your business, we encourage you to call Accruit.
The extend a discounted service to our clients and offer education
and benefit calculation without obligation. Please direct your inquries
to Jim Burnett, Director of Business Development - Heavy Equipment.
His phone number is 720.963.5005 and e-mail is
jimb@accruit.com.
(As
printed in the Fall 2006 issue of Powerlines.) |
