Does a Cost Segregation Study generate additional depreciation deductions over the building's life?

No. Total depreciation over the life of the building will not change. A cost segregation study changes the timing of the depreciation deductions, allowing for a greater amount of depreciation to be deducted in the first 15 years of the building's life; and, a significant portion of that will be deducted in the first five or seven years. This is what creates the net present value (NPV) benefit.

How long does a Cost Segregation Study take to complete?

It typically takes 6 to 9 weeks to complete a detailed engineering-based cost segregation study.

Is there a minimum building cost required for a cost segregation study? What assurance is there that the NPV benefit will exceed the cost of this study?

There is no minimum building cost required. However, cost of conducting the study begins to outweigh benefits when the building cost (tax basis) falls below $1,00,000 - $750,000 range. We will provide a complimentary feasibility analysis to estimate the NPV of deferred taxes you can expect from a cost segregation study of your building.

Does the IRS allow a Cost Segregation Study to be performed on buildings that were purchased, constructed or improved prior to this year?

Yes. A cost segregation study can be performed on any building that was placed into service as far back as 1987. With the recent advent of Rev. Proc. 2002-19, "Catch-up" depreciation is recognized all in the first tax year affected by the study, no matter how much the resulting change to income is. This procedure requires an automatic application for change of accounting method (Form 3115) to be filed in the first year affected by the study.

If I don't have architectural blueprints, is cost segregation still possible?

Yes, however, our engineer will have to conduct an extensive site visit, which will add costs to the overall project.

What items do you require in order to conduct a Cost Segregation Study?

Proposal Request
  • Blueprints and specs
  • AIA G702/G703 (contractor's final application for payment)
  • Any relevant invoices that capture cost breakouts for qualifying assets (especially when AIG G703 was not prepared with sufficient details), invoices for additional items not included in the general contract
  • General Ledger that contains all property accounts, including any work performed on the property outside of general contract work
  • Summary of all construction related indirect costs - architectural and engineering fees, bonds, permits, legal fees, construction period interest, etc.
  • Summary of other purchases related to the project - fixture and equipment to be installed, etc.
Proposal Request
  • Settlement statement
  • Listing of closing costs paid outside of closing
  • Blueprints and specs if available
  • Property appraisal report
  • Renovation schedule/construction draws
Proposal Request
  • Property appraisal report
  • Blueprints and specs if available
Proposal Request

The building was placed into service in a prior tax year and the tax return has already been filed

  • Any of the items listed above in an applicable situation
  • Depreciation schedule showing the building from the most-recently-filed federal income tax return

 

Assisting Tax Advisors

Our Cost Segregation Studies are conducted by accountants and engineers who specialize in engineering-based Cost Segregation Studies in accordance with the IRS Cost Segregation Audit Techniques Guide.


Quality Cost Segregation Group is a member of:

CCIM San Antonio / South Texas Chapter - Affiliate Member

Quality Cost Segregation Group, LLC

P.O. Box 160426
San Antonio, TX 78280
210.561.1200

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