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April 2012
Real Estate Depreciation News You Can Use
Repair vs. Capital Expenses

The IRS recently released temporary and proposed regulations that provide guidance on the application of Code Secs. 162(a) and 263(a) to amounts paid to acquire, produce or improve tangible property.

 

These regulations will affect how many taxpayers capitalize assets beginning in 2012, including requiring additional componentization of structural building components. 

 

Additional details will be forthcoming in future newsletters.

 
Quick Reminder

 

Several lucrative tax breaks have EXPIRED AS OF DECEMBER 31, 2011 including:

 

  • Qualified Leasehold Improvement Property (15-year recovery period)
  • Qualified Restaurant Improvement Property (15-year recovery period)
  • Qualified Retail Improvement Property (15-year recovery period) 

 

It is still possible that these provisions will be extended into 2012, however it looks more and more likely that no action will be taken until after the November elections.

 

Tax Court Update

 

 Recent Tax Court Cases 
 

 

There are two recent tax court cases of importance to commercial property owners and the cost segregation industry.

 

The first case (AmeriSouth XXXII, Ltd.) involved personal property classifications for an apartment complex. The Tax Court determined that certain assets frequently considered personal property in apartments should be structural components (27.5-year property). The owner could have contested the IRS but decided not to. Their reason was simple. They had recently sold the property and did not have any reason to defend their classifications. It seems reasonable to surmise that most of the disputed assets could have been defended by referencing previous landmark cases and revenue rulings that were not presented to the Court in this situation.

 

The second case (PECO Foods Inc.) reiterated IRS guidelines pertaining to allocation of purchase price. The taxpayer agreed in the purchase contract to a detailed allocation of purchase price for all purposes including tax reporting, and then later decided to perform a cost segregation study that differed in allocation. The IRS disallowed the more advantageous reallocation. Quite simply, the lesson learned here is that a detailed allocation in a purchase contract may not be in your best interest. You should give careful consideration to the income tax aspects of this allocation before committing yourself to such a contract.

 

Please feel free to contact us to discuss either of the above cases or any other cost segregation needs.  

 

 

 

 
The CRS Advantage

 

Cost Recovery Solutions, LLC is a tax and engineering consulting firm dedicated to helping building owners reduce taxes and increase cash flow through Cost Segregation, Energy Tax Services (§179D), Tangible Asset Appraisals and Fixed Asset Reviews.

 

Our team brings the following expertise to all of our projects:

  • All work is prepared by our specially trained in-house engineering and tax professionals with the following designations:
    • Senior Member (SCSP) of the American Society of Cost Segregation Professionals (ASCSP)
    • Accredited Senior Appraiser in Cost Surveys (Cost Segregation) and Machinery and Technical Specialties from the American Society of Appraisers (ASA)
    • Chartered Financial Analyst (CFA)
  • In-house CPA with over 40 years experience in taxation specializing in real estate
  • Recognized as experts in the industry; frequently invited to speak at seminars and continuing education programs including the AICPA's National Practitioners Symposium; published articles in a wide range of publications
  • Consulted by the IRS in developing the current Audit Techniques Guide on Cost Segregation
  • Performed projects throughout the United States and have experience with a wide variety of asset types
   

Contact Us

 

For more information or a complimentary projection of benefits, please contact: 

 

Jerry Kootman
Managing Tax Director
jerry@crscostseg.com

Cost Recovery Solutions, LLC
www.crscostseg.com
407 Main Street
Metuchen, NJ 08840
Phone: (732) 548-3855
Fax: (732) 549-8844



Jerry Kootman

 

 

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