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Cost Segregation: Challenges, Misconceptions, and Strategies After Tax Reform

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, June 25, 2019

Recorded event now available

or call 1-800-926-7926

This course will guide tax professionals, property owners, and investors through unique opportunities created by The Tax Cuts and Jobs Act of 2017. The changes brought about have certainly created more challenges for tax professionals as they must now analyze fact patterns and entity structures with a more holistic approach. Our panel of experts will focus on the top issues clients must consider in response to tax reform including cost segregation, depreciation, and the recent technical corrections.

Description

Cost segregation involves properly identifying shorter life assets embedded in 27.5 or 39-year property and reclassifying these to 5, 7, and 15-year tax recovery periods. Cost segregation will apply in familiar surroundings – items such as decorative lighting, cabinets, carpet, window treatments, and special-purpose electrical are all potentially personal property items, eligible to be classified to a significantly shorter life. Doing this can provide substantial up-front cash for property owners. In addition to accelerating depreciation, benefits may include property tax savings and transfer tax savings in certain states. A well prepared, comprehensive cost segregation study can also serve as a baseline for disposition deductions for assets permanently removed from buildings in the future.

The Tax Cuts and Jobs Act of 2017 raised the impetus for cost segregation studies by permitting 100% bonus depreciation for certain assets. Previously, bonus depreciation was available only on new newly constructed assets. The Section 179 limit increased to $1 million and the phase-out threshold to $2.5 million. New buildings are ideal for the studies; however, property owners can reap substantial benefits from a look-back study allowing them to go back in time and take the accelerated depreciation they are entitled too – all without the need to file amended tax returns. These changes are easily handled by preparing the Form 3115, Application for Change in Accounting Method.

There are varying methods used for cost segregations and varying professionals are available to perform a cost segregation study. Certain types of businesses, including medical practices, restaurants, and apartments, to name a few, reap greater savings than others. Property owners need to exercise due diligence before engaging in a cost segregation study. There are many firms that do not possess the expertise to properly prepare and defend a study.

Listen as our panel of experts explains the ins and outs of cost segregation studies so property owners and tax professionals can better determine which properties and businesses are most likely to benefit from a study. The panel will guide practitioners and property owners through essential considerations, including the effects of tax reform, methods and advisers, segregating new and old property, and others.

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Outline

  1. Overview of Tax Reform
  2. Challenges and Misconceptions
    1. Bonus depreciation – rates, application, and phase-out
    2. ADS rules for large taxpayers
    3. Electing Real Estate Trade or Business
    4. 179 Expense Rules
    5. Transition rules on construction
    6. Written binding contract rules
    7. Drafting errors in legislation
    8. Technical corrections
    9. Impact on Rehabilitation Credits
    10. Impact on 1031 Exchanges
  3. QBI Expense Deduction vs. Accelerated Depreciation
  4. Cost Segregation Studies – beyond accelerated depreciation
    1. Utilizing data to help fund future improvements
    2. Fixed Asset Reviews –hidden treasure

Benefits

The panel will review these and other important issues:

  • Tax reform changes impacting cost segregation studies
  • Identifying eligible property and businesses
  • Effect of tax reform on cost segregation
  • State of qualified improvement property
  • Differences between cost segregation methods

Faculty

Bryant, Greg
Greg Bryant, CCSP
Managing Partner
Bedford Cost Segregation

As Managing Partner of Bedford, Mr. Bryant has successfully established the firm as a recognized industry leader,...  |  Read More

Rodkin, Debbie
Debbie Rodkin
Partner
Bedford Cost Segregation

Ms. Rodkin is a partner with Bedford’s southeast office, and since 2005 has worked to cultivate relationships...  |  Read More

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