INTRODUCTION

I realized that I could not write this essay without introducing important notions on economics. So I wrote a brief essay on economics and gave it that title. This is why a reader may choose to read that essay before continuing with this essay on court ordered depreciation. This leads me to a story that I heard years ago.

The chief executive officer (CEO) of growing business enterprise wanted to select a person to be the corporation’s vice president of the tool and die division. So he asked his chief engineer what is two plus two and the engineer replied that 2.00 plus 2.00 is 4.00. Then he asked his chief of sales what is two plus two and the chief of sales replied that it was a number between three and four. Finally he asked the chief accountant what is two plus two? The accountant then pulled down the shades, closed the door, and replied very softly - how much do you want it to be?

SEPARATE PERSONAL PROPERTY

In most states, each spouse owns their own separate personal property. In this sense, ‘personal’ means for the private use of the spouse who owns the property so that any property that a spouse had acquired before marriage remains the separate property of that spouse. A spouse’s separate property includes gifts, inheritances, funds received from sales, rents and leases of the spouse’s separate property, and funds from the sale of a spouse’s separate property.

In community property states, property owned and controlled entirely by one spouse in a marriage is called separate property. At divorce, separate property is not divided under the state's property division laws, but is kept by the spouse who owns it. Separate property includes all property that a spouse obtained before marriage, through inheritance or as a gift. It also includes any properties that are traceable to separate property. For an example, cash from the sale of a vintage car owned by one spouse before marriage is separate property.

REAL PROPERTY AND PERSONAL PROPERTY

Real property refers to things attached to real estate and personal property refers to things that are movable and belong to a person. For an example, a seller can remove personal items such as furniture, rugs, paintings, pictures, and other personal items. However, the seller cannot remove safety devices, the roof, the garage, the heating system, or the plumbing. Some areas require an inspection before the sale of a home. This type of inspection is done to ensure that the home remains according to local codes and is fit for habitation.

COMMUNITY PROPERTY LAWS

In community property states, each spouse owns and controls their own separate property. This means that any property acquired before marriage remains the property of the spouse who owns it. This also means that any property taxes that arise from that ownership remains responsibility of the spouse who owns it. Other forms of separate property are gifts, inheritances, purchases, and income from leases, rents, and sales. The important principle is that separate income and separate property must not be commingled (mixed or combined) with other property.

EQUITABLE DISTRIBUTION LAWS

The problem with the concept of equitable distribution is what does it mean? The problem is that ‘equitable’ does not mean ‘equal’ is means valid and fair. In practice it means that the higher earner gets two-thirds of the distribution while the lower wage earner gets one-third. This doesn’t make sense. Suppose both spouses earn nearly the same salary; the unintended consequence is that an undeserving spouse can claim all or part of any gift, inheritance, purchase, and income from leases, rents, and sales. In theory, equitable distribution is dictated by reason. According to reports, the higher wage earner gets two-thirds of the total value of the property while the lower wage earner gets one-third of the total value of the property. This is senseless and arbitrary.

SEPARATE DEBTS AND JOINT CREDIT ACCOUNTS

The rule on separate debts is that any debt acquired before marriage remains the separated debt of the debtor and not the debt of the spouse. The separate debt rule can be made to include repairs and improvements to the other spouse’s separate property so that the innocent spouse is not held responsible for debts they did not incur. Unfortunately the community property laws that exist in Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington, and Wisconsin does not acknowledge separate debts.

This leads to ‘Catch-22', where a circumstance that denies a solution. Bill and Alice have a joint credit card account. Therefore, Alice can keep Bill from closing the account under certain state laws. But Bill cannot remove Alice from the joint credit account, because she has the right to use the account and force Bill into debt under the law. So Alice becomes a vexatious and harassing debtor and Bill has no way to change the situation.

A joint credit account is one where both parties agree to be responsible for the charges no matter who actually incurred the charges. However, having a joint account may lead to trouble if your spouse spends wastefully and does not provide for the future. In other words, one spouse works for a living and the other spends the earnings. However, a joint credit account with a low limit can help a couple with no credit history to earn a credit history.

A joint credit account can simplify bill paying and budgeting. One statement every month will allow you to see at a glance how much is being spent in the household. However, if a couple cannot agree on how to control their earnings, keep your accounts separate and never get a joint account because there is no requirement to have one. By keeping the accounts separate, you can prevent yourself from becoming responsible for expenses and debts that are not yours.

If you divorce or end a relationship with another, if is important to completely sever your ties with this person. Divorce does not remove your responsibility to retire the account. You must remove your name from the account to prevent further financial abuse. However, many lenders will not remove you from a binding contract when there is an outstanding balance on the account. In this is so, then contact the lender and ask them to freeze the account to prevent any new charge. Then retire the account and cut the financial ties with your spouse.  Keep your accounts separate because your spouse or your domestic partner has no right to your personal account.

DIVISION OF DEBTS

If both spouses can agree to how debts should be divided, then the court may approve the decision. Whether or not debt division is amicable, the court is required to consider the following principles when dividing the marital debts. A separate debt is the responsibility of the spouse who incurred the debt and marital debts are the responsibility of both spouses. The problem is that the division of debt does not relieve the other spouse of their responsibility to retire any debt. So a creditor may ignore a court order and demand payment from the other spouse, though that spouse did not incur the debt.

ECONOMIC AND BUSINESS DEPRECIATION

Economic depreciation is the loss of value or of purchasing power resulting from an increase in the level of domestic prices. So economic depreciation refers to lowering the value of the currency of a country. So economic depreciation affects the balance of trade relative to a country’s currency and the currencies of other countries.

Depreciation is the loss of value of certain kinds of property over time. The economic notion of depreciation includes the loss of value of buildings, machines, vehicles, and other property through use, accident, or obsolescence. For tax purposes, depreciation is applied only to property that produces taxable income. So in business, depreciation can be treated as a cost of doing business but the depreciation of personal property is a different matter because it is not a business asset.

TYPES OF DEPRECIATION

Accounting standards provide four types of depreciation. They are straight line (SL), sum of the years’ digits (SYD), double-declining balance (DDB), and the modified accelerated cost recovery system (MACRS). These are artificial standards and do not represent the actual value of an item. For an example, assets that can be depreciated over three years include tractors and race horses over two years old.

Straight line depreciation is determined by the total value of the asset divided by the number of years of useful life. Similar to an average value, the depreciation charge is the same value each year. For an example, a $1,000 copier that has a four-year life would depreciate $250 each year.

The sum of the digits depreciation is determined by the sum of the digits. For an example, a $1,000 copier that has a four-life would depreciate by the sum of the digits where 4 + 3 + 2 +1 is equal to 10. Therefore, the fractional values are 4/10, 3/10, 2/10, and 1/10. So the actual SYD depreciation is $400, $300, $200, and $100.

The Double-Declining Balance depreciation is determined by the remaining book value (not the original value) multiplied by double the straight-line percentage rate. The actual DDB depreciation is $400, $240, $144, $86.40, and $51.80. The total depreciation is $922.20 and this is why DDB is not a popular method of depreciation.

The Modified Accelerated Cost Recovery System is the Internal Revenue Service’s system for depreciating assets. This is an accelerated depreciation method where more depreciation is taken in the first years than in the later years. This method is table-driven where the tables are provided by the IRS. First, lookup what the IRS determined to be the useful lifetime of your asset. Then use another table to determine the depreciation rate and record it on the tax form.

SOME MONETARY TERMS

Deflation is the contraction in the amount of available money or credit that causes a decline in prices. As a result the economy contracts while unemployment increases. In the third quarter of 2009, the government initiated a ‘cash for clunkers’ program where a person can turn in their car and buy a new car that meets certain clean air and milage standards. This government initiative was a part of an economic stimulus package and the results remain unknown (September 3, 2009).

A side effect of this economic deflation is that the taxpayer will pay more in taxes because the tax tables were deliberately designed to include inflation. This could lead to an economic ‘yo-yo’ or a partial reversion to a previous stage where government spending will increase at the detriment to individual spending.

Inflation is the increase in the amount of available money or credit relative to the available goods and services that causes an increase in prices. As a result the economy expands while employment increases. The side effect of inflation is that what you could buy last year will cost more in the next year.

Stagflation is a result of sluggish economic growth, high inflation, increasing prices, and high unemployment when the economy is not growing. What a person bought the previous year will cost more next year. This occurred in the 1970's. The relationship between world oil prices, inflation, stagflation and the balance of trade is indisputable.

NON DEPRECIABLE ITEMS

Every musical instrument and most non depreciable items cannot be subject to a court order that includes forced inventory of what was not stolen and what was stolen. The failure of a judge or a law enforcement officer to refuse to recover stolen items proves their guilt. This is based on their own preconceived notions that belong to the Feminazis and their big lie proving their guilt.

If any Craftsman Hand Tool ever fails to give complete satisfaction, return it to Sears for a free repair or replacement. Other tool companies may have similar warranties. These tools cannot be depreciated but must be assessed at their current price with adjustments for inflation and deflation. In other words, the money paid yesterday is probably worth more than today. So no one needs to know about depreciation where money paid today is worth less than money paid before.

COLLECTIONS

Some people like to collect things such as coins, paintings, old books, sport memorabilia, or anything else. The problem is that once a judge knows that you have a collection, that judge will want an appraisal of your collection. The problem is that the value of a collection could be determined by its content. For an example, two brothers play on the same championship team for three seasons. Dividing the two baseball cards into two smaller collections might no illustrate the value of the two brothers.

In another case, a famous actor and actress sued for divorce. In that suit she wanted his collection of baseball cards. She got his baseball card collection and immediately destroyed it. She never wanted his baseball card collection and the truth was that she didn’t want him to enjoy his own collection. The point is that many collections have a sentimental value that exceeds their monetary value.

DEPRECIATION FOR ITEMS LOST THROUGH AN ACT OF NATURE

An act of nature is an unavoidable event that could not be predicted and the type of depreciation is identical to those mentioned before. Typically, insurance policies may exclude certain causes of loss such as an act of nature, an act of war, or an act of government. An act of nature, arson, war, or government includes the following: drought, earthquakes, an environmental apocalypse, high winds, floods, infestation, persistent rain, wild fires, the government’s failure to act in the face of calamity, and legislation designed to wrongfully deprive a person of their property and freedom.

Insurance must be updated to the present and existing value of the home and its contents. This is figured according to the value of the currency including inflation or deflation. The appraisal paid by the insurance company can be added to the policy premium or subtracted from the insurance proceeds (beware of this practice).

CATCH-22 DEPRECIATION

Catch-22 refers to a solution denied by the circumstances. Fire insurance requires a special premium charge, plus the addition of smoke detectors and fire suppression systems to qualify. A fire suppression system may use or may exclusively use water or include water as a part of the suppression protocol including the alternating use of water and other agents. The problem is that insurance companies insure water damage is by acts of nature and not by water in fire suppression. I hope that this has changed to the better.   In other words, your fire suppression system may cause more economic damage than an act of nature or an act of an arsonist.

KEEPING INSURANCE POLICIES AND RECEIPTS

Homeowners’ insurance is a property insurance policy that covers private homes. Renters’ insurance is an insurance policy that covers apartments and other rented dwellings. Without into details on this subject, I can imagine that an insurance company that issues a homeowner’s policy would want some proof. These companies realize that items are discarded or replaced and keeping track of the inventory can be problematic. So it is important that receipts and warranties are kept in a safe place and so, some use freezers and refrigerators to preserve their documents. Others use fire and flood proof safes or security boxes while others use bonded storage. However, the problem with bonded storage is that it may be subject to inspection and seizure by the authorities though no law was broken.

Homeowners’ insurance covers private homes, its contents, loss of use, loss of possessions, and liability insurance for accidents that may occur in the home or on the property.  Most homeowner insurance policies usually requires that as least one insured persons occupies the home.

THE BUREAU OF LABOR STATISTICS

I contacted The Bureau of Labor Statistics’ website and found that it included a yearly inflation calculator. This person specifies the start year, the end year, and the dollar amount for the start year. Then the inflation calculator will compute the dollar amount for the end year. For an example, I used 10 dollars for the start year beginning in 1982 and the year ending in 1993. The result was that something costing ten dollars in 1982 would cost $14.97 in 1993.

Edward Steven Nunes