Ark. Code R. 26-51-424 - 3(a)(1) (1997) - Voluntary Removal or Demolition

When the usefulness of some or all of a taxpayer's capital assets ends causing the taxpayer to discontinue use of, or permanently discard, such assets from use in the business, the taxpayer may claim as a loss for the year in which it takes such action the difference between the cost of the assets (less depreciation, etc.) and the salvage value thereof. This deduction does not extend to a case where the useful life of property ends solely as a result of those gradual processes for which depreciation allowances may be taken (wear and tear), nor does it apply to inventories or to any assets other than capital assets. Moreover, this deduction applies to buildings only when they are permanently abandoned and to machinery only when its intended use has been permanently discontinued. Any loss to be deducted under this provision must be fully explained in the taxpayer's income tax return.