Video: Cost Recovery Overview

In this lesson, Nick Palazzolo, CPA, breaks down the concept of cost recovery, explaining that it refers to methods such as depreciation, amortization, and depletion used to gain tax benefits for significant business assets. He sets the groundwork for understanding how to calculate tax depreciation for tangible property, the differences between depreciating tangible assets and amortizing intangible assets, and the future changes with the removal of depletion from the exam. Nick clarifies what is essential to focus on for the exam and provides context for understanding the relevance of certain accounting concepts, like stock warrants. The lesson concludes with a comparison of different expensing options for tax depreciation, including makers and section 179 bonus depreciation.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Welcome today to the concept of cost recovery. Are we actually recovering the cost and getting money back for the cost of an asset? No, not really. That's not what we're dealing with. This is more so depreciation, different methods like that to get the benefit for tax purposes of these significant assets. Let's dive into our learning objectives and see more of what we got. First off, we're going to want to calculate tax depreciation for tangible business property. You depreciate tangible assets, you amortize intangible assets, as we see there, and then we are going to deplete natural resources. Just a note is that depletion is going to be removed from the exam come 2024. However, it's still just important to kind of know, to understand what it is. It will appear on other exams just as a concept. So just keep that in mind as you see this. Just make sure you're familiar with it, but don't go too overboard. There's a lot that we do cover where it's like, okay, you just want to kind of get an understanding of it. For example, what's the concept of a stock warrant? That's just another thing where you may not see it on the exam, but it's important to see it because you will see examples that reference what a stock warrant is. You don't have to calculate anything about it, but you want to understand what the AICPA is going to include there as little words. And they assume you know what that is, but if you don't, you might be a little bit at a loss. Lastly, we want to compare the tax benefits of the different expensing options for tax depreciation for federal income tax purposes. We're going to see makers and we're going to

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Property Tax: Acquisition and Disposition of Assets

Module: 5 Concepts, 55 Videos

Basis and Holding Period of Assets Overview

0:44

Introduction to Basis and Holding Period of Assets

8:20

Costs Included in a Asset's Taxable Basis

7:24

Examples of Calculating Tax Basis