because there’s a difference between effective life for...

because there’s a difference between effective life for accounting purposes and business legislation for tax purposes.

e.g if you buy a car for $50,000 for you business. The $50,000 is deductible immediately. This would show $0 in value remaining in the tax books for the vehicle because the entire value has been claimed.

however, if you wanted to sell it a year later, the value of the car is obviously not $0. It would be a reduced value based on depreciation for accounting purposes. E.g $37,500.

If you sold the car for then $37,500 against a nil balance in the books the gain would be $37,500.

So the “possible tax” or deferred tax liability payable on $37,500 would be $11,250 (assuming a 30% tax rate for a coy)

it’s not to say the coy will have to pay that. Just that they may have to at that date. If they wait the full 8 years before selling the car the value for accounting and tax would be $0 so no deferred tax in the future.