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Cost Segregation – A Tax Savings Tool
We have been talking about Cost Segregation for quite sometime now in my print and e-newsletters – the Real Estate Investment Digest, as well as in one of my past conference calls.
For those of you who missed it, Cost Segregation is a strategic tax savings’ tool that allows companies and individuals who have constructed, purchased, expanded, or remodeled real estate to increase their cash flow by accelerating depreciation deductions and deferring their federal and state income taxes.
The goal of a Cost Segregation study is to identify, segregate, and reclassify project-related costs that are currently classified as real property to shorter depreciable tax lives for federal and state income tax purposes. Recent IRS rulings and procedures have allowed taxpayers to change accounting methods to take advantage of these previously understated depreciation expenses–back to 1987. This is done without amending tax returns.
Cost Segregation started in the 1960’s and has been called component depreciation studies, investment tax credit studies and various other names. No matter what name you use–Cost Segregation can save you tax dollars and increase your cash flow. There are over 300 court cases and I.R.S. rulings supporting the benefits of Cost Segregation. The following is an example.
Hospital Corporation of America v Comm. 109 TC 21 (1997) ruled that certain assets associated with a specific piece of equipment not linked to the normal operation and maintenance of the building qualify for five-year depreciable tax lives instead of 39-year depreciable tax lives.
Essentially, the tax courts and IRS have agreed that the taxpayer can use a Cost Segregation study to segregate the cost of his assets.
Standby as I elaborate on what Cost Segregation can does. At the end of this series, I would recommend companies specializing in this field.
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.
Commercial Office Buildings, Commercial Real Estate, Commercial Real Estate Investment Strategies, Cost Segregation, Financial Analysis Calculations, Investing Tips, Investment Opportunities, Property Management, Tax Savings Tool, Uncategorized
Commercial Real Estate Investment Strategy, Cost Segregation, Financial Analysis Calculations, Increase Savings, Investing, Investing Tips, Investment Opportunities, Miami, Miami-Dade, Property Management, South Florida, Taxes, Wealth-building Strategy
Very interesting. You share a lot of valuable information. You got me hooked Mr. Zylberglait.
Cost segregation is as old as the Beatles. It just comes up with new names.
no matter, as long as it’s a good legal way to decrease negative cash flow. i’m sure uncle sam wouldn’t mind. investment rock stars like warren buffet and donald trump use this tool.