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Hi. We recently incorporated and are saving for a large equipment purchase.
Someone suggested we open a "sink fund" and we could use the money we
have earmarked for this purchase ($20,000) as a tax deduction for this year.
Then when we buy the Equipment ($65000 purchase price) we will have
already gotten $20,000 depreciation value and so would figure depreciation
only on the remaining value of $45,000. Is this correct?
Can we save the money in a money market account?
What happens if we end up needing the oney for something else, do we just
pay the tax on it or is there a penalty? How do we set up this kind of account
and what is the technical term for it?
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I am not aware of this type of sinking fund being deductible...
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