What is a Cost Segregation Study? Cost Segregation is a lucrative tax strategy that enables commercial property owners to claim more deductions and lower their overall tax liability— which yields immediate cash flow gains. The objective is to accelerate depreciation for tax purposes. Property Allocation Consultants, LLC., is a national company based in Huntington, New York that provides comprehensive engineered ‘cost segregation’ surveys. “A quality study is a factually intensive determination that is based on complex tax law and engineering analysis.” (IRS) PAC is a complimentary resource for Commercial property owners, CPAs, Tax Certiorari attorneys, Commercial real estate brokers, Title firms, Appraisers, 1031 Exchange services and other professional companies involved in Commercial Real Estate.
Objective of a Cost Segregation Study
A cost segregation highlights component cost for personal and real property providing ability to retire assets as renovation or replacement is needed. PAC adheres to the “IRS 13 Principle Elements of Quality.” We stand behind our reports which have never been audited. However, our audit support policy will protect you in the unlikely event of an IRS examination at no additional cost.
Case Study
A REIT purchased a Texas office building and engaged PAC to produce a cost segregation study. PAC engineers and architects performed a comprehensive inventory of the land, building, and ancillary improvements according to IRS guidelines. When evaluating their purchase decision, the client had estimated its first year depreciation allowance at $384,000 based on straight-line depreciation schedules. The PAC analysis identified significant opportunities to reclassify assets as personal property and land
The RESULTS: Total 1st year depreciation deduction amount
$800,000
Total 1st year tax benefit (1st year depreciation x tax rate of 39%)
$312,000