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Last month, I discussed cost segregation analysis;
what it is and why it would be advantageous for a
commercial building and sometimes a residential
rental property. If you missed part 1 of this 2 part
series, be sure to go back and check it out.
Cost segregation studies are used to determine
the allocation or reallocation of the total cost of
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recovery periods. This is important in
order to properly compute
depreciation deductions.
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components of your building and
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recovery periods. This equates to a larger
depreciation deduction and opens the door
for other, more aggressive depreciation
methods.
It is important to note here that it’s not as simple as
youmaking an assumption and arbitrarily assigning
a value to certain components of your property.
This would likely not pass an IRS examination so
the methodology used is critical for an accurate
cost segregation study.
A cost segregation analysis is generally performed
for either newly constructed property or acquired
property but, each of these situations require a
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Newly constructed property, which includes
remodels and additions to existing properties,
usually involves construction that was completed
relatively recently. The cost seg is typically
performed either at the completion of the
construction project or shortly after.
Direct cost information from contractors, vendors
or other suppliers and indirect cost information
from Architects, Engineers and other
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available. Also, construction documents
that were used for the project such as
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and contract documents are generally
readily available as well and are used
i n
the detailed engineering approach.
By Tina Moe, CPA
WANT TO WRITE OFF
YOUR COMMERCIAL BUILDING OR
RENTAL PROPERTY FASTER?
WHATYOUNEEDTO KNOWABOUTTHE
COST SEGREGATIONANALYSIS! – PART 2
SOAR TO SUCCESS
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M
ARCH
2017
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Core Business Strategies