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| To find additonal information related to Industry News regarding our services, please find the links below to websites with additional resources: |
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Cost Segregation Audit Technique Guidelines as published by the IRS
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Energy Policy Act of 2005
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| IRS Updates on Research & Development Tax Credits |
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ETS recently completed a cost segregation study for a large business park near Seattle, Washington.
We were able to reclassify over 28% of the real property which resulted in nearly a $2,000,000 of tax benefits.
Albert Einstein is quoted as saying: "Compounded interest is the 8th Wonder of the World. It can work for you, or against you. When you retain it, it works for you.
When you borrow it, it works against you!" |
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Engineered Tax Services. , Inc.
319 Clematis Street, Suite 603
West Palm Beach, FL 33401
Telephone: 800.236.6519
Office: 561.253.6640
Fax: 561.253.1039 |
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| Cost Segregation |
Cost Segregation Studies are an IRS approved method originating in 1997 which allows real estate investors to reclassify tangible personal property from real property and accelerate the depreciation of investment real estate property.
Your commercial property has assets which can be recouped over 5 years versus the traditional 39 year method. Many investors are becoming more aware of significant advantages offered by cost segregation studies which allow them to free the money trapped in the walls of their properties to minimize taxes and increase cash flow.
The reclassification of tangible personal property from real property and the difference in the depreciation allowed may be significant to you. Free valuable dollars which are presently being depreciated at 39 (or 27.5 - if commercial residential property) years and appropriately reclassify assets into 5, 7 and 15 year - reaping significant value and ROI. Put the time value of money to work for you!
* The commercial property has a tax basis >$1,000,000 - or multiple properties > $1,000,000
* The property owner - has federal income tax liability
* The business endeavor is "for-profit" |
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The Property:
* The property was constructed or acquired post 1987
* The property has been renovated or remodeled since 1987
All types of properties qualify and the average building costs eligible for reclassification and accelerated depreciation:
* Restaurants 20 - 45%
* Hotels 25 - 50%
* Shopping Malls 20 - 40%
* Medical/Dental Facilities 20 - 35%
* Airplane Hangars 10 - 30%
* Warehouses - 10 - 20%
* Auto Dealerships 15 - 35%
* Hospitals 20 - 40%
* Mixed Use Property 15 - 30%
* Golf Clubs and Courses 15 - 35%
* Retail Facilities 30 - 60%
* Theme Parks 15 - 35%
* Grocery Stores 20 - 35%
* Apartment Buildings 15 - 45%
* Fitness Centers 20 - 45%
* Banks 35 - 50%
* Manufacturing Facilities 35 - 45%
* TV/Radio/Cell Companies 20 - 40%
* Leaseholds 15 - 40%
* Research Facilities 20 - 45%
* Office Buildings 10 - 25%
* Assisted Living/Retirement Facilities 20 - 45%
* Resorts 20 - 45%
* Wineries 8 - 25%
* ...and many more
The actual savings vary according to the design of the facility, use, date of service and the actual costs associated with the property. REAL TIME BENEFITS:
* MAXIMIZED TAX SAVINGS THROUGH ACCELERATED DEPRECIATION DEDUCTIONS
* INCREASED CASH FLOW
* REDUCED REAL ESTATE TAXES (POSSIBLE - DEPENDING UPON JURISDICTION)
* PROPERTY INSURANCE REDUCTION
* INCREASED OPPORTUNITIES
A Cost Segregation Study is an engineering based analysis of your building's cost to construct or the purchase price in order to identify the tangible personal property (IRC Section 1245) the indirect costs and the land improvements from the building's "structural components" or real property (IRC Section 1250). The personal property may be subject to accelerated depreciation which results in IMMEDIATE CASH FLOW. A supportable Cost Segregation Study is a highly technical process and must be completed by specialized engineers. Precisely for this reason Engineering Tax Services provides the Team to meet all IRS, Treasury, and legal requirements. |
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Our Team approaches every Cost Segregation Study under the "Detailed Engineering" method specified by the IRS. "...The Detailed Engineering approach..uses costs from contemporaneous construction and accounting records. Construction-based documentation, such as blueprints, specifications, contracts, job reports, change orders, payment requests, and invoices are used to determine unit costs." IRS Publication Relative to Cost Segregation Studies the IRS states: "...The primary issue.is the proper classification of assets as either Sec 1245 or Sec 1250 property." Additionally, the IRS has addressed and identified the credentials for anyone undertaking a supportable or defensible Cost Segregation Study: "..the study is performed by "qualified" individuals or firms, such as those employing". personnel competent in design, construction, auditing, and estimating procedures relating to building construction." (PLR 7941002).
Over 300 rulings, letters, and IRS Memoranda have provided documentation and significant case law for the support of Cost Segregation Studies: Hospital Corporation of America vs. The Commissioner is one of the landmark decisions which gave support to the way Engineering Tax Services reviews and analyzes your property/properties to determine the tangible personal property within your building which may qualify for depreciation lives of 5, 7, or 15 years rather than 39 years (if non-residential real property) or 27.5 years (if residential real property). Even if you are presently depreciating certain property in an accelerated schedule - your advisors may still be leaving your money on the table. Only if you have secured a Cost Segregation Study which can be performed only by specialized experts (per the IRS) will all allowable property be depreciated on an accelerated basis. |
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*The following identifies what Engineering Tax Services will provide within your study:*
* THE Engineering Tax Services STEPS TO A COST SEGREGATION STUDY: FREE - NO RISK Initial review to determine if you would like to proceed.
* Feasibility/applicability: ETS will evaluate your (taxpayer - building owner) current tax status and future business plans to determine whether a Cost Segregation Study will benefit you.
* ETS will then evaluate the building's construction costs by component or systems.
* ETS will then review the project's/facility's construction documents, including as built drawings, and project specifications.
ETS will visit the facility/project to determine and identify how the components and systems are utilized - as well as to document the systems and components. ETS will provide a "Detailed Engineering" review of the assets including special purpose mechanical and electrical systems, decorative finishes, site improvements, and any process related to and special purpose construction. ETS then classifies or reclassifies each building component into the appropriate tax life as prescribed by IRS guidelines. ETS identifies and allocates indirect costs to each asset. ETS compiles a written report with the asset detail supporting the reclassifications and completes the necessary tax form(s). ETS will include all necessary elements in your Cost Segregation Study making the process seamless. Like you - we believe that there is no reason to overpay taxes.
Let ETS provide a preliminary review of your property NO COST - NO OBLIGATION. We can provide you with an estimate of IMMEDIATE CASH BENEFITS and Long Term Savings.
I'm proud to be paying taxes in the United States. The only thing is - I could be just as proud for half the money. -Arthur Godfrey |
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