Champion Tax Solutions offers a comprehensive array of solutions and services to meet our clients' needs.  One of the most exciting opportunities currently afforded by the Internal Revenue Service Tax Code is the ability to accelerate depreciation on building related components.  More information on these techniques are presented below.  Please contact one of our principals for a complete discussion on other solutions we provide or if you have any questions.

---

Cost Segregation

Cost Segregation is the structured process of classifying buildings and their related components into the most effective property classes to maximize tax benefits.  Accelerated depreciation can lead to significant increases in after tax yields on real estate investments. 

Many building owners are overpaying federal (and state, if applicable) income taxes because they are not depreciating their property as quickly as the Internal Revenue Code allows.

Who benefits from Cost Segregation?  Owners of buildings placed in service by a tax paying company can potentially benefit from cost segregation.  This can apply to new construction, renovations, or acquisitions of real property. 

What property types are best suited?

•  Office Buildings
•  Medical Facilities
•  Restaurants
•  Warehouses & Distribution Facilities
•  Retail Stores and Malls
•  Banks
•  Automobile Dealerships
•  Apartments/Hotels/Senior Housing

Are the results of Cost Segregation Studies recognized by the Internal Revenue Service?  Absolutely. Over 1000 IRS revenue rulings and court cases and the IRS’s own Cost Segregation Audit Techniques Guide define the proper methodology for Cost Segregation studies.   

Does cost segregation increase my chances of being audited? No. Nothing about the process is considered a “red flag” for audit.

Will I need to file an amended return? No. IRS Revenue Procedures 96-31 allows a taxpayer to file a Form 3115 Automatic Change in Accounting rather than an amended return. This form can be used to correct depreciation as far back as 1987.  This provision allows taxpayers to “catch up” missed depreciation by filing IRS Form 3115. 

What is the cost for an estimate? There is no charge for estimates. With a small amount of information from the client Champion can estimate your potential tax savings based on results achieved on similar buildings.

What is the typical benefit of a Cost Segregation Study?  Assuming a 35% federal tax rate, with no bonus depreciation, each $1M in building basis can translate into 20% ($200,000) in reclassified land improvements and personal property.  This equates to $65,000 in actual tax savings received in the first few of the holding period.  

Cost Segregation can be a valuable tool for you to maximize income tax savings from your existing real estate portfolio.  Request a FREE analysis of potential income tax savings today!

Send mail to kgossett@championtaxsolutions.com with questions or comments about this web site.
Copyright © 2006 Champion Tax Solutions