Looking for year-end cash? Make all the right tax moves — from changing your accounting to buying capital equipment now, rather than later — and you may strike a hidden cash vein.
Marie Leone, CFO.com | US
December 11, 2008
Great article, great ideas - and let me add one more. A lot of companies out there ought to be doing 1031s (Like-Kind Exchanges). This is a pretty well-known strategy in the real estate world, but what most people don't know (and by "most people," I'm talking about something like 90% of CFOs in potentially affected businesses, believe it or not) is that you can do 1031 exchanges on just about any capitalized asset. So construction and heavy equipment, leasing and rental fleets, mining and oil/gas assets, IT, medical equipment, telecom infrastructure, and so on. The way it works is that if you're going to sell a depreciated asset and buy a "like-kind" replacement, you can defer the tax on the gain from the sale, maybe indefinitely. Depending on state and local tax rates, this can add up to as much as 40% of the sale total. There are a couple of other interesting angles to 1031s right now, too. First, Obama's national infrastructure plan is going to be very good news for businesses in the construction sectors, and companies that take advantage of LKEs this year can get a jump on the process. Second, we've hit the tipping point on greening the economy, and companies looking to transition to more efficient plant (heating/cooling, lighting, plumbing, etc.) can use 1031s to plow their cash right back into sustainable operations. The potential cash flow impact is billions and billions of dollars, obviously. So to all the strategies you offer in the article, add 1031, a code that's been on the books since 1921. Work with a reputable Qualified Intermediary and ask a lot of questions about how your cash will be managed and about things like data security. There are right ways and wrong ways to do it, but if you play by the rules you can reinvest your money in your business instead of sending it to the IRS. Sam Smith Accruit, LLC accruit.com
Posted by Sam Smith | December 12, 2008 01:00 pm© CFO Publishing Corporation 2009. All rights reserved.