July 2008
Depreciation News You Can Use
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Ask The Experts
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Q: How does size of
a property and hold period impact the feasibility of performing a cost segregation study?
A: The
general rule of thumb is that a shorter hold period decreases the benefit to
performing a study. The same is true for size of a property. Most cost segregation providers suggest
studies for properties that will be held for at least five years and have a
depreciable basis of at least $1,000,000.
There are certain cases however where these limits do not hold. For instance, a study should be feasible for
a $600,000 interior fit out of an ornately finished office space or a high tech
space such as a data center.
We
have developed a highly sophisticated modeling system that allows us to prepare a
projection of benefits for each property at no cost to you. We can quickly
generate various scenarios based on possible hold periods to gauge the impact
on tax savings. We can also vary the assumed percentage of reclassified
property to provide a low, medium and high scenario.
This
ability to quickly generate various scenarios allows you to determine if the
cost/benefit scenario justifies taking the next step. We suggest you contact us
for any property acquisition, construction or improvement so that we can
provide a model of projected benefit and cost to perform the study.
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Technical Update
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IRC §1031 Tax Deferred Exchange
Many of the responses to last month's questionnaire
requested we supplement our depreciation discussions with another great tax
deferral tool, IRC §1031 tax deferred exchanges (like kind exchanges). This
issue of the newsletter will provide a brief overview of tax deferred exchanges that will be expanded
in future newsletters.
Cost segregation, by its very nature, allows real estate
owners to more quickly write off their properties by depreciating a portion of
the property over 5, 7 and 15 years. Tax
deferred exchanges can then be used to continue to defer taxes upon the sale of
a property.
Proper planning and coordination between accountant,
cost segregation provider and qualified intermediary is necessary however, to
ensure all relevant issues such as the depreciation recapture rules and
classification of real and personal property are fully understood and
considered.
What is an IRC
§1031 Tax Deferred Exchange? Read More...
What types of property may be exchanged? Read More...
How does an exchange work? Read More...
Stay tuned for additional articles on IRC §1031 tax deferred
exchanges in the upcoming months as we dig more deeply into this valuable
concept. We will provide updates on current
developments in this industry including a detailed discussion on the recent Revenue
Procedure 2008-16 which addresses tax deferred exchanges for vacation
homes.
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The CRS Advantage
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Cost Recovery Solutions, LLC (CRS) is a specialized engineering firm trained exclusively in the unique discipline of Cost Segregation. CRS has distinguished itself as an industry leader by providing their clients with a seamless integration of cost segregation into their business. We are the cost segregation provider many accounting firms employ as their cost segregation resource due to our unique qualifications which include:
- Our tax director has lectured extensively on the topic of cost segregation including his recent presentation at the AICPA national Practitioner's Symposium
- The IRS consulted CRS in developing their current Audit Techniques Guide on cost segregation
- Our engineering director is one of a small group of accredited senior appraisers (ASA) in the disciplines of both 'Cost Surveys' and 'Machinery and Equipment' from the American Society of Appraisers
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Contact Us
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For more information or a complimentary projection of benefits, please contact:
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