This is just wrong

[jussi]

I was speaking to my neighbor who's a contractor. Today he went to the dump site to throw out some trash from some demo he had done on a house. He told me there was a guy dumping out BRAND NEW tools. In the box, sealed, never used, etc etc. There were boxes and boxes of them. They weren't high end brands but rather things you would find at Kragen stores. Nail guns, compressors, drills, jacks, etc. He asked if he could take some and the owner said no. As they were unloading it one of the guys was taking pictures and I guess documenting the dump. After they got all the tools out (and this is the sad part) they drove over it with a bulldozer and covered it up with more trash.

[jziegler]

Sad, but it probably has to do with corporate accounting practices. I'd imagine someone was writing off the tools, and to do so requires that they be destroyed, or so I've been told (I am not an accountant). The same thing is supposed to happen with used equipment that a company disposes of. I think that the company can't get it off the books if there is a possibility that someone else is using it.

Jim

[cabinetman]

They could have been "recalled" tools, deemed dangerous or unsafe, or the "take" in a heist that needed to disappear, or a TV show like "Candid Camera", to get whatever documented responses they could.
.

[Daryl]

Counterfeits, or maybe a buyout by a new company who wanted to get the known cheaper brand off the market.

[LCHIEN]

There are many reasons a company would want to remove assets from inventory, which in turn, saves paying inventory taxes, removes depreciation costs, and gives them a write off (basically a deduction against profits) from income taxes.

Removing assets woud be because
1. excess inventory - bought tools or inventory in anticipation of business but now business is less.
2. defective goods, and damaged goods (smoke and water damage could leave them looking new), the write off could be bigger than the cost to fix them
3. obsolete inventory - old items would cut into sales of newer products, write off is more profitable
4. Goods made in violation of a copyright, patent or injunction - must be destroyed or royalties paid. (counterfeit goods someone suggested, would fit in this category although destruction would probably fall to a third party).

Mergers could easily result in 1 & 3 above.

Because large dollars are usually involved, and write-offs are simply paper money, fraud against the government (through avoidance of taxes) is easy, there's a requirement for documentation that destruction did occur, lest the company take a $10 million write off on old and excess inventory only to have it appear on eBay in someone's name (could be the company president, the garbageman, the shipping clerk, or one of their BILs.) basically making free money at that point. It could be sold as new and the proceeds pocketed by the unscrupulous president or opportunistic shipping clerk.

[Hellrazor]

You guys are a bunch of tool huggers

[just started]

So, did he go back with a big shovel?

[crokett]

What Loring said. When my company upgrades my laptop they take my old laptop, otherwise a perfectly good one and crush it. It could be sold/donated/recycled/parted out/etc but for depreciation/tax purposes it has to be of no further value so it gets destroyed.

[BobSch]

What Loring said. When my company upgrades my laptop they take my old laptop, otherwise a perfectly good one and crush it. It could be sold/donated/recycled/parted out/etc but for depreciation/tax purposes it has to be of no further value so it gets destroyed.

That's interesting, our company has a strict 3-year tech refresh schedule and all the old desktops and laptops are offered free to employees.

[crokett]

I guess your company doesn't care as much about writing it off completely.

[Russianwolf]

Sorry guys but computers are a 3 year depreciable item. at 36 months they are fully depreciated and show up on the books at $0 value. What the company does with them is up to them.

1)offered free to employees
2)donated to charity
3)sold
4)destroyed

in all cases above most places at least remove the hard drive and destroy it separately.

If it is sold, they have to show the profit that is received. Since the book value is $0, every penny they receive (minus any cost of sales) is profit.

Same is true of all asset write-off, but the lebth of depreciation can vary. 5 years for furniture and equipment, 30+ years for a building or 10+ for improvements there of.

In the case of destroying inventory, the likely cause is the manufacturer. The manufacturer in many cases will buy back obsolete inventory. If you prove that you destroy it, then they may give you a bit more in the buy-back as they don't have the expense of destroying it themselves. If you need proof of this practice, look at any paperback book. There is a statement from the publisher that "if you buy a book without a cover to inform the publisher" as it may have been reported as destroyed. When books are destroyed the publisher gets the covers back prior to paying the buy-back amount.

[jackellis]

I've never understood the logic behind writing off an asset completely rather than trying to sell it for something. Let's say a company buys a $100 tool and depreciates it fully over 5 years. During that time, the cash value of the tax savings amounts to about $35. On the other hand, if they sell the tool for $100 after 5 years, it's true they will have to pay the $35 in taxes the'd claimed over the life of the tool, but that's still less expensive than simply throwing it away because in effect they paid nothing for the use of the tool for 5 years.

But then again, I've discovered most people don't understand basic elements of the income tax system.

[shoottx]

The really sad thing in all of this is that it is a discussion of tax policy (right or wrong) not a discussion of good business practices.

The current IRS code causes me to spend time considering the tax consequences of issues that should really be determined by good business. I get really frustrated with this process.

[Tom Slick]

As my dad (CPA) says "If the IRS made sense, I wouldn't have a job".

[LCHIEN]

I've never understood the logic behind writing off an asset completely rather than trying to sell it for something. Let's say a company buys a $100 tool and depreciates it fully over 5 years. During that time, the cash value of the tax savings amounts to about $35. On the other hand, if they sell the tool for $100 after 5 years, it's true they will have to pay the $35 in taxes the'd claimed over the life of the tool, but that's still less expensive than simply throwing it away because in effect they paid nothing for the use of the tool for 5 years.

But then again, I've discovered most people don't understand basic elements of the income tax system.

Well your example is probably off because very few $100 tools can be worth $100 after 5 years... use and age will render them worth considerably less, in fact the 5 year depreciation assumes they will be worn out or obsolete after 5 years.

And I've found that most tools and equipment continue to be used after 5 years rather than simply throwing them out. Only tooling and computers tend to be totally useless afer five years.

specialized equipment tends to be hard to sell and general purpose equipment continues to be useful. I guess that's why they don't get sold much. I don't have the qccountants coming through my lab and takeing out five-year old scopes, voltmeters, spectrum analyzers and trying to destroy or sell them.

So i guess the answer is that fully depreciated items either have reduced but still useful life that is basically free to keep using. Selling them requires knowlege, effort and paying taxes and maybe even replacement at higher costs.