Probably not, because CPAs simply do not have the engineering expertise necessary to properly break-out all the assets (costs) that are considered in a cost segregation study.

A comprehensive and appropriately documented cost segregation analysis maximizes a building’s tax benefits by identifying, classifiying, and segregating a much larger percentage of a building’s assets for accelerated depreciation for federal income tax purposes. This can mean three, five, sometimes twenty times more savings than the 3% found in cabinets and carpeting. A cost-segregation specialist looks for many items when working to identify tax savings in a building. Questions that a specialist would ask include:

• Is there more than one power source in your office?
• Do the walls in your office penetrate the ceiling tiles, and are they load bearing?
• Is the decorative paneling in your reception area and conference room glued, nailed, or hung on the wall?
• Is your cooling system oversized in order to cool your data processing room?

(The Practicing CPA)

• Certification by the study’s author
• Qualifications of the personnel performing the study
• Project overview and subject property description
• Scope of the study
• Methodology and procedures
• Asset classification summary
• References and citations to tax court cases, revenue rulings and regulations justifying asset classification
• A detailed “take-off” spreadsheet showing property components and costs
• Reconciliation of project cost to depreciation schedules
• Calculation of adjustment for property acquired and depreciated in prior tax reporting years
• Photographs of the subject property

• Under prior law, taxpayers would separate a building’s parts into it’s various components; doors, walls, and floors. Once these components were isolated, taxpayers would depreciate them using a short cost-recovery period. CPAs referred to this practice as component depreciation.

• A retroactive study can be performed for properties that have been capitalized as far back as 1987. You can claim the difference between the allowed depreciation and what you actually claimed in prior years, all on the tax return.
  • No amended returns or IRS approval
  • Depreciation “Catch-up” is all claimed in current tax year
  • Form 3115 filed with current tax return
  • The 481(a) adjustment is captured on form 4562 on the current tax return

  When a taxpayer performs a retro-active cost segregation study, the differences in depreciation deductions for the prior years are accounted for via a catch-up deduction in the current tax year. This is reported on the tax payer’s return as a section 481 adjustment. Under Rev Proc 2012-19 the adjustment is taken entirely in the current year and does not necessitate the filing of amended returns. The 481 adjustment is automatically accepted by properly completing and attaching Form 3115 to the taxpayer’s return. Information necessary to complete Form 3115 will be contained in the Cost Segregation Study report if it is prepared by a qualified firm and meets the IRS’ requirements for a “quality” study.

• Cost Segregation Opportunities for CPA’s, Accountants, Real Estate Attorneys, Tax Attorneys and ConsultantsCost segregation can provide significant benefits to your clients including increased cash flow, accelerated tax deductions, and improved returns on their real estate investments. We work in partnership with professional advisors and consultants to bring this service to their clients. You identify clients that are good candidates for a cost segregation study and we will provide a free estimated analysis of benefits to consider for a final decision.

• The key to maximizing the depreciation benefit is to apply a combination of in-depth tax depreciation knowledge with a detailed engineering approach. This involves a familiarity with pertinent court cases, revenue rulings and other pronouncements, and a detailed blueprint analysis in order to identify, quantify and establish an income-tax basis for the shorter lived property in residential buildings.
  • Is there more than one power source in your office?
  • Do the walls in your office penetrate the ceiling tiles, and are they load bearing?
  • Is the decorative paneling in your reception area and conference room glued, nailed, or hung on the wall?
  • Is your cooling system oversized in order to cool your data processing room?

  (The Practicing CPA)

• Once a Cost Segregation study has been completed and each component of the property has been isolated and properly valued, the argument can be established to reduce the valuations by the amount of the items that would not be damaged by a loss or might otherwise be excluded.  Examples of such items could be the parking lot, landscaping, slab and underground improvements. Finding insurance companies and brokers with such “appetites” is not always easy or possible but our exclusive Certified Insurance Councilors stay abreast of the ever-changing markets and offer their advice FREE of charge and obligation.

• Legacy Ventures, L.L.C. is an authorized CSSI independent representative in Texas and Oklahoma.CSSI is a cost segregation firm specifically focused to perform engineering-based cost segregation studies for commercial properties valued at $150,000 – $750 million. CSSI performs engineering-based cost segregation studies as an essential tax savings tool for commercial property owners. We are the premier company for engineering-based cost segregation studies in America.