Intercompany sale of fixed assets

[Crystal Tan]

I was told that If the net book value of fixed assets to transfer to another related party is $0, it is a must for the transferring party to charge $1? Does anyone knows what is the reason for doing so?

If charge at $1 means that when I do consolidation, I will need to take out every period until the FA are sold. Isn't it a hassle?

 

[bklynboy]

There is no such rule. We have done this in the past to aggregate all fixed assets at the parent level instead of holding in separate entities at BV (where its fully depreciated there was no charge since its deemed "worthless"). I think they are trying to make sure its a bona fide arms length transfer - but using an arbitrary $1 does not fit the bill.