Cost Segregation Studies: Best Practices

Description

A thorough cost segregation study can materially reduce federal income taxes (by segregating personal property such as equipment, furniture, electrical systems, etc.) that can be depreciated over five, seven or 15 years) and property taxes (by separating real and personal property taxed at different rates).

Other potential benefits include timed depreciation deductions to maximize cash flow, creation of strong documentation for audits, and capture of retroactive savings for new or remodeled properties added since 1987. However, taxpayers cannot be too aggressive, lest they incur depreciation recapture or penalties.

What level of internal and external expertise is needed to produce a reliable cost segregation study? How closely should you follow the IRS Cost Segregation Audit Techniques Guide? What are the elements (e.g., review of all cost records, facility inspection, photographs) of a study that follows best practices?

Listen as our panel of advisors with considerable experience in cost segregation studies offers their standards and experiences to help you refine your own approach.

Outline

1. Reasons to perform a cost segregation study
   1. Separating non-structural elements, exterior land improvements and indirect construction costs
   2. To identify construction-related costs that can be depreciated over a shorter tax life
   3. Adjust the timing of depreciation to maximize cash flow for other purposes
   4. Create a defensible audit trail
   5. Immediately recapture retroactive savings on property added since 1987
   6. Reduce property taxes
2. Eligible real property
3. Features of the cost segregation study process
   1. Internal and external resources
   2. Need for a construction engineer
   3. Applicable standards and guidance
4. Experiences from prior studies

Benefits

The panel will explore these and other relevant topics:

• Standards and guidance from the IRS, American Society of Cost Segregation Professionals and elsewhere.
• Proper timing for a study, be it done post-purchase, in the year a property is placed in service, or pre-construction.
• Features and documentation in a high-quality cost segregation study.
• How to minimize the potential downsides arising from conducting a study.

Upon completing this seminar, you will have new approaches and alternatives to consider in performing an effective cost segregation study that separates personal from real property assets, for tax reporting purposes.

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