CFP

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Characteristics and Income Taxation of Business Entities - Disposition

Disposition

Business itself:
If a business is disposed of prior to the end of the amortization period, the company/owner can deduct any remaining deferred start-up costs. However, they can deduct these deferred start-up costs only to the extent they qualify as a loss from a business.

Business Assets:
Depreciable assets can be: exchanged, retired, or sold.

After the disposition of an asset (depreciable), an accounting entry is made to recognize any unrecorded depreciation expenses up to the date of the disposition. The asset's cost and accumulated depreciation are then removed from the respective general ledger accounts. The losses or gains (realized) associated with the disposition are recorded in a separate account and appear on the income statement named as either income (gains) or expense (losses).

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