Also known as: depreciate · depreciates · depreciated · depreciating · depreciations
Written by attorneys · grounded in primary & secondary sources — see below
A reduction in the value of an asset over time due to wear, obsolescence, use, or other factors.
Deborah Dunn and Darius Dixon divorce after twenty years. The court must divide their home and investment portfolio. Evidence shows the home lost value from deferred maintenance while the portfolio declined from market shifts. The court factors both the depreciation and each spouse's role in preserving or dissipating asset value when making an equitable apportionment.
Doris Duffy serves as trustee of a testamentary trust holding corporate stock. The stock's market price falls sharply. Life beneficiaries claim the trustee must reimburse them for the lost value. The court applies state law to decide whether the depreciation must be charged against income or principal.
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Denise Donovan and Devon Drake, trustees, purchased manufacturing shares that later declined in value. Remainder beneficiaries seek surcharge. The court examines whether the trustees acted prudently at the time of purchase or whether they should have sold before further depreciation occurred.
Dakota Industries buys railcars and claims accelerated depreciation deductions on its tax returns. The board later considers a merger that would alter the company's ability to use those deductions. Directors weigh the lost tax benefit against the proposed transaction price.
Davenport Pharmaceuticals holds specialized equipment whose book value has been reduced each year through depreciation entries. A minority shareholder challenges a proposed reorganization that would transfer the assets at depreciated book value rather than current market value.
Dorothy Daniels's estate includes a historic residence. The executor proposes demolition. Neighbors and heirs prove that razing the home would cause immediate and permanent depreciation in neighborhood property values and seek an injunction to prevent the loss.
A court must consider each spouse's contribution to or dissipation of asset value, including depreciation, when apportioning marital estates. The statute lists depreciation alongside acquisition, preservation, and appreciation as a factor the court weighs without regard to marital misconduct.
Supporting sources
Depreciation amortizes the cost of tangible wasting assets such as buildings or equipment. Depletion serves the same purpose for intangible or natural resources such as minerals or copyrights. Both require the trustee to set aside reserves to preserve principal unless the trust instrument provides otherwise.
Supporting sources
The asset's cost is divided by its estimated useful life and an equal portion is recorded as expense each year. This method spreads the cost evenly so the income statement reflects the portion of the asset used up during the period rather than the entire outlay in the year of purchase.
Supporting sources
Absent a breach of trust, a trustee is not liable to beneficiaries for loss or depreciation in the value of trust property. Liability arises only when the trustee fails to meet the applicable standard of care in selecting or retaining the investment.
…had difficulty in generating sufficient taxable income to offset increasingly large investment tax credits (ITCs). Accelerated depreciation deductions had decreased available taxable income against which to offset accumulating ITCs. The Company took these deductions, despite their effect on usable ITCs, because the rental price…