WHO IS A GOOD CANDIDATE?
If you own or lease real property that was placed into service after 1987 and can realize the benefits of accelerated depreciation deductions, then cost segregation can be a highly beneficial tool to incorporate into your overall tax minimization strategy. Some key considerations include:
A study can be performed for buildings which are owner-occupied, owned but leased to others, and leased properties.
The entity structure is irrelevant. A study can be performed for individuals, corporations, partnerships, or other entity type.
The subject of a study may be a newly constructed facility, purchased or acquired building, or work performed to an existing building, such as a renovation, remodel, or expansion. Studies may also be performed on gifted, exchanged or inherited property. Changes in valuations, or basis adjustments, may also provide new opportunities. "Step-ups" in value, such as those resulting from IRC Sec. 754 partnership transfers, can create additional depreciable basis which may make a cost segregation study more attractive than before the change in value. In short, any real property transaction which results in significant depreciable basis can create opportunity for a cost segregation study. Illustrated below are property transactions commonly considered in cost segregation studies.
Type of facility and bonus eligibility are just a few of the many factors which can impact the potential benefit of study. In general, investments in real property with a depreciable basis of $500,000 or greater are potentially good candidates for a cost segregation study. A feasibility or cost/benefit analysis is prepared to confirm the viability of a project.
A study can be performed on virtually any type of building. A list of facility types by industry for which cost segregation studies are commonly performed is provided below.
The only true time restriction is that property must be placed in service after 1986. Cost segregation studies are only allowed for MACRS (Modified Accelerated Cost Recovery System) property, which was introduced with the Tax Reform of 1986. Studies are most beneficial if performed in the first 5 years. However, studies performed on buildings placed into service 15+ years ago may still be advantageous for some taxpayers. Studies performed on properties which have been in service for at least one year are commonly called "look-back" studies. These types of studies allow any "overlooked" or "missed" depreciation deductions to be reported on the current year tax return in a single cumulative adjustment (IRC Sec. 481(a) adjustment) through the filing of Form 3115, Application for Change in Accounting Method.
WHAT IS COST SEGREGATION?
Cost segregation is an IRS-recognized tax deferral strategy used by owner of commercial real estate to produce an immediate increase in cash flow. Cost segregation is the process of allocating (or reallocating) building costs, generally depreciable over 39 years, to land improvements and tangible personal property, which are depreciable over shorter recovery periods, generally 15 years and 5 or 7 years, respectively.
The reclassification of building costs (IRC §1250 property) to land improvements and tangible personal property (IRC §1245 property) accelerates depreciation deductions, thereby minimizing current tax liabilities, leaving more cash for property owners to invest in other activities. A dollar today is worth more than a dollar tomorrow, and time value of front-loaded depreciation deductions can effectively create an interest-free loan from the IRS.
Cost segregation can be a highly beneficial investment for owners of real property as it provides substantial tax savings and generally yields a Return on Investment of at least 10 to 1, with results as high as 100 to 1 not being uncommon.
To see case studies illustrating the financial impact of cost segregation studies, .
The IRS adds new chapters and makes numerous updates to the Audit Technique Guide.
Tax Planning Using Depreciation Capitalization Rules
Accounting Today, May 25 2016
Palmetto Cost Segregation, LLC will have an expanded news section which will feature news, articles, tools and reference materials for certain industry sectors. Among the first to be introduced are retail, restaurants, manufacturing, automotive, and storage.
COST SEGREGATION & YOU
Palmetto Cost Segregation, LLC will prepare a cost/benefit analysis at NO CHARGE to provide an estimate of the tax benefits and fee for a cost segregation study on your building.
The complimentary Cost/Benefit Analysis calculates the estimated additional depreciation and taxes deferred as a result of the cost segregation study - on an annual basis of the life of the building. Since the cost segregation study centers around the concept of the time value of money, the analysis will also show the Net Present Value of the study.
Additionally, a fee quote for the services will be provided. The cost of a study is tax deductible.
Finally, the Cost/Benefit Analysis will compare the Net Present Value of the study to its after-tax cost to show the Return on Investment.
Cost Segregation in the Low Country
Bridging big-firm experience with the pricing model of a smaller, local firm to give Low Country property owners the option of using a local provider, capable of providing quality cost segregation services at competitive prices
FACILITY TYPES BY INDUSTRY
COST SEGREGATION IN THE LOW COUNTRY
Palmetto Cost Segregation, LLC was established by Lindsay Bryan, a Low Country native - to give property owners along the coastal corridor between Savannah and Charleston the option of using a local provider for their cost segregation services. While PCS can help clients located anywhere in the U.S., PCS is proud to fill the much-needed role as a local cost segregation resource, offering quality services at competitive prices to property owners located in or near the following communities:
Garden City, GA
Richmond Hill, GA
Hilton Head, SC