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Let me show you a well kept secret that many Fortune 500 companies didn't want you to know about. Now the secret is out and it's approved by the IRS. Cost Segregation can uncover the gold mine right under your nose (and feet, and head) but mainly behind your walls. Let me show you how JD Terry & Associates and our engineering based Cost Segregation can unleash the profit potential from your Commercial Property.
Put Some Fast Cash In Your Pockets...NOW!
Cost Segregation is an IRS approved means of increasing your cash flow on selected commercial properties. Commercial property owners can increase depreciation deductions on both new and existing facilities, thus minimizing their overall tax liability. By employing the services of JD Terry & Associates, an engineering-based Cost Segregation firm, you can achieve considerable increases in cash flow.
What is a Cost Segregation Analysis?
| Engineering-based Cost Segregation allow commercial real estate owners to reallocate real property (Code Sec. 1250) to personal property (Code Sec. 1245), which results in a substantially shorter depreciable tax life. By engaging JD Terry & Associates, a Cost Segregation expert, non-structural building components can more accurately be classified into the 5, 7, or 15-year depreciable lives assigned to personal property. This benefit alone can generate tremendous cash flow in both current and future years. |
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While many CPAs are aware of the benefits surrounding bonus depreciation on newly constructed properties, they (CPA firms) are not equipped to do an engineer based Cost Segregation Analysis to take full advantage of the service. Without an engineering based Cost Segregation study, the building is commonly depreciated over a 39 or 27.5 year life. In this case the owner is not taking advantage of an IRS approved Cost Segregation Analysis. JD Terry & Associates takes advantage of this and can provide a wide range of building components, such as electrical installations, plumbing, mechanical components, and finishes can be identified and reclassified into the shorter-lived asset classes.
The Cost Segregation studies allow the property owner to accelerate the depreciation of as much as 25-30% of typical buildings. In addition, the studies allow the property owner to allocate items such as architect fees and permits and bring the potential amount reclassified to over 35% of the cost of the building.
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Who Can Use A Cost Segregation Analysis?
If you purchased or constructed a facility since 1987 that is valued at least $750,000 (less land), or made leasehold improvements in excess of $350,000, will likely benefit.
You should plan on retaining the property for at least one year and have a taxable income to take full advantage of a Cost Segregation Analysis.
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Properties with the Highest Savings Potential Include:
- Airport Hangars
- Apartment Buildings
- Auto Dealerships
- Auto Service Centers
- Banks
- Restaurants
- Day Care Centers
- Warehouses
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- Department Stores
- Distribution Centers
- Fitness Centers
- Flex
- Golf Courses
- Hospitals
- Industrial
- Laboratory / Research
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- Manufacturing Facilities
- Medical / Surgical Facilities
- Nursing Homes
- Assisted Living Centers
- Marinas
- Office Buildings
- Resorts
- Shopping Centers
- Hotels
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How Long Has Cost Segregation Been Around?
Cost Segregation has been around for a long time. In fact, it has been in existence since the Investment Tax Credit (ITC) back in 1962. But there have been several major tax law changes since then. A tax court case back in 1997 was a great breakthrough in how the IRS ruled on Engineering based Cost Segregation Analysis. The Hospital Corporation of America successfully defeated the IRS and changed the method of differentiating real property and personal property using this method.
There have been other recent rulings issued by the government to spur economic growth that reinforces and encourages commercial property owners to use this method.
One recent example is that after the tragedy of 9/11, the IRS allows commercial property owners (taxpayers) to catch up on all deductions from previous years for items reclassified into the shorter tax lives as a result of Cost Segregation Analysis. In other words, you can benefit from all the previous years of ownership, and after the Analysis, reap the (financial) rewards in the year of the study.
Another bonus for getting a Cost Segregation, especially for new construction, is the enactment of the Jobs and Growth Tax Act of 2003 passed by the government. This allows for increased bonus depreciation on personal property in the first year from 30% to 50% for property acquired between May 5, 2003 and January 1, 2005.
Just when you thought things were looking good, you thought ‘wait a minute; I have to wait 2 years before I can change the method of calculating my depreciation.’ You can thank the government for another code change that allows the method of calculating your depreciation to be changed in any year.
This makes it even more beneficial to have a Cost Segregation study performed since the IRS revised the 2 year waiting period for changing the depreciation method. The combination of all the IRS revisions make it a wise choice to have an Engineering based Cost Segregation study performed by the experts at JD Terry & Associates. Call today at 253-299-4054 and schedule a no cost evaluation.
Why You Need A Specialist
The main reason you need an Engineering-based Cost Segregation expert, such as JD Terry & Associates, is because the IRS requires the supporting documentation and expertise. An expert can properly dissect all the construction information, identify and segregate the subcomponent costs.
An Engineering-based Cost Segregation Analysis provides the CPA with the information and detailed supporting documentation necessary to comply with strict IRS regulations and requirements for audit defense. In other words, as a property owner, you want to be able to sleep at night knowing you engaged an expert in the field of Cost Segregation. That's why you want the experts at JD Terry & Associates. We are one of the nation's largest providers of Cost Segregation Services with over 23 years experience, over 6000 projects completed to date with cash flow benefits that have exceeded One Billion Dollars.
The preliminary financial analysis is conducted by us at no cost to you (or your client if you are a CPA).
Closing
Cost Segregation is one of the most valuable tax planning strategies available to commercial real estate owners today. Virtually every taxpayer who owns, constructs, renovates or acquires a commercial real estate facility stands to benefit from having a Cost Segregation study performed. The study offers the perfect opportunity to have a direct and sizable impact on your cash flow.
The U.S. Treasury Department States:
“A LUCRATIVE TAX STRATEGY THAT SHOULD BE USED ON ALMOST
EVERY MAJOR PURCHASE OF COMMERCIAL REAL ESTATE."
Example
$10 million office building, placed into service 10 years ago
Original depreciation method: 39-year straight line
Reclassified Amount with Cost Segregation Analysis:
5-year property- $1 million
15-year property- $1.5 million
| Example Section 481(a) adjustment calculation and resulting tax benefit: |
| Depreciation reported previously: |
$ 2,564,100 |
| Cost Segregation Analysis Study Depreciation: |
$ 3,923,070 |
| Section 481(a) Adjustment: |
$(1,358,970) |
| Tax Rate |
35% |
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| Tax Benefit in Year of Study |
$ 475,640 |
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