Nope! In most cases, if you were reimbursed by the U.S. Government for direct equipment, you don’t own the property. Therefore, you can’t depreciate what you don’t own. Also, if you’re reimbursed for the total cost of the equipment, you don’t have a cost basis to depreciate since your book value would be zero. The general rule is you depreciate equipment at the lower of its cost or fair market value (at the time placed in service), not higher. Therefore, there is nothing to depreciate. I have to admit, I’ve seen some awardees and accountant’s find creative ways of depreciating something that is not owned or has no book value.
This is myth #11 of our SBIR Accounting Myths blog series. George Moker is a CPA and an entrepreneur who brings a real approach to managing the accounting needs of your firm. George created this series of blog posts to his more than 30 years of small business and startup experience in an attempt challenge the myths about an adequate accounting system and its importance within your organization.
For more information on how we can help with your SBIR accounting needs, please visit us at www.mokercpa.com