ATTENTION: PROPERTY OWNERS AND ADVISORS |
Commercial Building Owners Can Save Significant Tax Dollars With New IRS Ruling |
Use Cost Segregation Studies to save significant tax dollars:
Recent IRS rulings allow commercial property owners to use shorter lives and accelerated methods for computing depreciation for tax purposes. This can result in significant tax deferral savings (as illustrated in the table below). In many cases, 15% - 40% of your building costs can be depreciated in the first 5-15 years versus 27.5–39 years.
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What buildings qualify?
Cost Segregation Studies can be performed for real estate holdings placed in service as far back as 1987. Studies can be performed on recently purchased facilities, newly constructed facilities and even major tenant renovations and leasehold improvements.
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| Facility Type | Total Capitalized Costs | 1st Year Tax Savings | First 5-Years Tax Savings |
| ▪ Multi-Family Apts. | $6,500,000 | $315,000 | $807,000 |
| ▪ Restaurants | $2,135,000 | $122,000 | $345,000 |
| ▪ Retail | $1,115,000 | $ 96,000 | $165,000 |
| ▪ Renovations | $ 975,000 | $ 93,500 | $186,000 |
| ▪ Manufacturing Facilities | $8,700,000 | $327,000 | $714,000 |
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Is it approved by the IRS?
Yes, as long as you follow their guidelines:
- The IRS has published the “Cost Segregation Audit Technique Guide” for its agents.
- The life-to-date deduction is allowed THIS YEAR compared to a four-year proration required previously. Filing amended returns for prior years is NOT necessary.
- The IRS now automatically approves your “Application for Change in Accounting Methods” (Form 3115) which is filed by your CPA.
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Why have an “engineered” Study?
In the 2004 Cost Segregation Audit Technique Guide, the IRS specifies that Cost Segregation Studies must be completed by “qualified personnel competent in design, construction, auditing, and estimating procedures relating to building construction”.
Cost Segregation Studies require a skill and understanding of the case law that is vested only in specialists.
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Why choose Cost Seg Associates (CSA)?
This is all we do. We are specialists in engineered cost segregation. Our engineering and tax staff have the experience and extensive knowledge required in this very specialized area. Our customized software combined with our experience in real estate, engineering, construction cost analysis and tax expertise sets us apart from our competitors.
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Working with your CPA or Attorney
Most businesses have their own CPA or tax attorney and this process does not interfere with that relationship, rather, it is ancillary to their work. We work with your accountant, CPA, or tax attorney through the whole process to make sure they have what is needed for the preparation of the tax returns.
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Will we know the estimated tax savings and fee before deciding to go forward with a Study?
Yes, once CSA has received the required information, we will provide (free of charge and obligation) your estimated tax savings. At this time we will also tell you what the cost of the Study will be. All that is required is some basic information about your building and a copy of your depreciation schedule.
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How do we get started?
Contact: Dennis Brandanger 952.831.6300 Ext. 12
Fax: 952.831.6302
Email: dbrandanger@costsegprofessionals.com
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