We provide Cost Segregation Services directly to
Clients or to CPA 's for the benefit of their clients who have 27.5
or 39 year property on their depreciation schedules. We typically
convert at least 25% of that long term property into 5, 7 and 15
year property. This results in significant cash flow through avoided
taxes. Our fees are only a portion of the first year savings realized.
Overview of Cost Segregation
After the 1986 Tax Reform Act, the IRS changed
its position regarding cost-segregation and component depreciation,
taking the position that corporations were no longer allowed to
use ITC principles in determining tangible personal property or
real property.
In 1996 the Hospital Corporation of America case
determined that the use of ITC principles in classifying investments
as personal or real property. It also legitimized the use of ITC
principles to assign depreciation recovery periods.
Subsequently the IRS issued Rev. Proc. 96-31 outlining
the procedure for property owners to recover depreciation deductions
they had not previously claimed.
In addition the IRS issued revenue rulings detailing
how corporations can submit a request for an
automatic consent for a “Change in Accounting Method”.
This automatic change allows corporations to claim
a current deduction for previously missed or
erroneously calculated depreciation.
The most recent, Rev. Rul. 99-49, provides that
a corporation or investor can claim “Catch-up” depreciation
on previously missed depreciation deductions on assets used in a
trade or business.
The catch-up provisions allow these businesses
to write-off these unrealized deductions. This can typically result
in no taxes due for over a four-year period.
The business simply claims the deductions on its
tax return and files an automatically approved summary report of
the changes in its methods of depreciation with the IRS.
It is obvious that property owners need cost-segregation
studies to properly classify investments as real or personal property
and insure that the assets are depreciated in the most tax efficient
manner in compliance with the IRS and the courts.
Additionally the IRS has ruled that these studies
must be prepared by Professionals who have the expertise to determine
property values. Residual methods are not allowed. This created
the basic need for the services of SEGREGATECOSTS.COM as most CPA
firms do not have these professionals on staff.
Due to the confusion regarding the laws and the
court cases, many corporations and investors have not claimed accelerated
depreciation nor made the distinction between real and personal
property when calculating tax depreciation.
