Valuation and Assets Services is a leader in providing Cost Segregation Studies. Allow us to show how allocating a portion of the 39-year assets to 5 and 15 year categories can bolster a significant increase in cash flow to you and your company!
A Real Estate Cost Segregation Study is an Internal Revenue Service (IRS) sanctioned practice of identifying assets within a real estate and their costs, and classifying those assets for federal tax purposes. Allocating the acquisition or construction cost of a building between real and personal property, based on case law and IRS guidance, allows property owners to reduce their overall current income tax burden and free up capital by improving their cash flow from the property.
Cost Segregation Study is an often overlooked opportunity by taxpayers to improve their cash flow. Taxpayers as a matter of routine know that commercial buildings are depreciated over 39 years and residential rental buildings are depreciated over 27.5years. However, most taxpayers may not be aware that a significant proportion of their property could be depreciated over 5, 7 or 15 years instead.
For example a healthcare facility with a cost basis of $19,590,000 placed in service in 2008 had net tax savings of $1,198,600 for the first five years of the facility’s life.
An assisted living facility with a cost basis of $7,500,000 placed in service in 2007 had net tax savings of $573,600 for the first five years of the facility’s life.
Our Cost Segregation Studies are beneficial if you;
- Built a new non-residential facility.
- Purchased a non-residential real estate facility.
- Plan on retaining the said facility for the next few years.
- Deemed by the IRS to be a taxable entity.
- Need to streamline property, plant and equipment records.
- Plan on stream-lining the property, plant and equipment records in anticipation of the IFRS.
We work with companies of all sizes, tailoring our expertise to their individual needs. Our experienced team of construction professionals and CPAs are dedicated to the cost segregation service niche. Unlike some of our competitors WE DO NOT OUTSOURCE OUR PROFESSIONAL WORK!!! The others may outsource your work and abandon you!
This is what our Cost Segregation Studies do for our clients:
- Federal and State income tax savings can be realized by taking advantage of the accelerated depreciation allowed for personal property. Although this process does not increase the total amount that can be written off, the increased depreciation deductions translate into lower taxable income in the earlier years of the real property’s useful life. The result is an increase in cash flow allowing the funds to be invested or used for other purposes in the business.
- Purchase price allocation is the process where the price of the business purchased is allocated among the respective assets and liabilities in the business acquisition. To report the real estate piece in a merger or other business combination our cost segregation study is utilized for the accurate and advantageous reporting of the value of the real estate on behalf of the taxpayer. The process involves an appraisal of the land “as though vacant and available” and then using cost segregation techniques to allocate the improvement into the appropriate tax or financial reporting lives. The benefits are realized in the supportable tax savings.
- Adequate and appropriate record keeping is an ancillary service from our cost segregation studies. The study allows us to identify our client’s assets and their costs, and categorize those assets for federal tax purposes. The process clearly documents the assets and allows the assets to be appropriately classified using applicable recovery periods for depreciation.
- IFRS (International Financial Reporting Standards.) – Should the IFRS become United States’ GAAP we, as a multi-valuation discipline firm, are best positioned to assist clients who elect either the cost model approach or the revaluation model approach in reporting under IFRS. We are currently answering enquiries from clients and CPA firms who are planning in anticipation of the great day. Call us!
Valuation and Assets Services has on its cost segregation team certified public accountants and construction professionals with a broad spectrum of experience in civil, structural, electrical, HVAC, mechanical, industrial and plant engineering.
Will your property qualify to benefit from Cost Segregation?
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