| What is a cost segregation study?
When should a study be done?
The VFGA Process
What projects qualify?
VFGA Areas of Experience
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*These studies are done by VFG Associates, Inc.
What is a Cost Segregation Study?
A cost segregation study is an analysis of the investment in a building to classify costs into the following categories:
- Building
- Land improvements
- Personal property
This classification effectively distributes a portion of the investment into assets with much shorter tax lives. The result could be an increase in the current cash flow due to the earlier deduction of depreciation.
When should a study be done?
A study can be performed in the year a building or improvements completed are placed into service, or anytime thereafter. In fact, current Internal Revenue Service procedures make it easy to go back and claim accelerated depreciation on reclassified assets acquired from 1987 forward.
The VFGA Process
- We will examine all plans, blue prints, cost records, contractor bid sheets, change orders, fixed asset ledgers and other records to identify costs to be set aside into shorter lives for tax purposes.
- Utilizing our tax and engineering skills, along with several computer based models, our study provides the proper arrangement of the assets and a clear and detailed audit trail.
- An assessment of the property will be made to observe and verify those components that meet the requirements for accelerated depreciation. Photos are included in the report for future reference.
- We will issue a full report detailing the project cost settlement, a cost summary by appropriate IRS class lives, property definitions, study procedures, photos and final results of facts to be used for income tax purposes.
What projects qualify?
Any structure used in a business activity, acquired or constructed after 1986, is eligible for the benefits of cost segregation, including current construction and additions to older property.
Cost segregation can be applied to the following:
- Automotive dealerships
- Shopping malls
- Storage facilities
- Airports
- Apartment buildings
- Sports facilities
- Retail stores
- Resorts
- Restaurants
- Golf courses
- Office buildings
- Nursing homes
- Manufacturing facilities
- Medical centers
- Hotels
- Industrial buildings
- Warehousing
- Distribution centers
VFGA Areas of Experience
Engineer services
- Review of construction documents, plans and blueprints
- Site visitations
- Analysis of mechanical and electrical systems
- Pre-design advisement on maximizing personal property classification
Accounting services
- Analysis of construction costs
- Monitoring of project’s depreciable basis during construction
- Determination of project’s depreciable basis after construction
Tax services
- Filing amended returns and/or carryback claims, if required
- Filing for change in accounting methods
- Up-to-date research on case law
- Compliance review
- Simultaneous documentary support
For more information on cost segregation studies, click here. |
