Real Estate Cost Segregation Studies
Tax savings from cost segregation studies performed on:
- newly purchased or constructed buildings
- buildings placed in service back to 1987
Generally, when businesses acquire or construct buildings, the costs are allocated into two categories; land and buildings.
A cost segregation study makes it possible for taxpayers to accelerate depreciation deductions by identifying and segregating nonstructural building costs and land improvement costs, which have much shorter depreciable lives than the assigned 39-year life for nonresidential real property.
The Tax Court has ruled that elements of a building, which heretofore had been classified as buildings subject to a 39-year useful life, could be classified as personal property subject to a 5, 7 or 15-year life.
On the average, for every $100,000 of 39-year property reclassified to 7-year property, the present value of the net cash flow associated with the acceleration of depreciation is around $20,000.
The IRS will allow a taxpayer to go as far back as 1987 to restate lives and methods, and deduct depreciation that would have been allowed had the property been classified as personal property from the original acquisition.
Our valuation specialists will help you realize significant depreciation deductions from:
- New buildings and facilities now under construction
- Buildings placed in service as far back as 1987
- Existing buildings undergoing renovation, remodeling, restoration or expansion after January 1, 1987
- Leasehold improvements to offices and facilities
- Acquisitions or investments in real estate properties
For further information please contact:
Carol Magyar, CPA, MST
Tax Director