Obtaining increased federal tax saving depreciation benefits through the proper classification of real and personal property within a building or buildings, is an economic must for anyone who builds or acquires real estate.

A well documented Cost Segregation Analysis on a building or buildings can help the taxpayer identify and segregate the costs from the longer life 1250 Real Property, to the shorter-lived 1250 Property, and 1245 Personal Property classifications for accurate accelerated depreciation.

Cost Segregation Analysis for federal tax depreciation purposes has been available to taxpayers since the demise of the Investment Tax Credit (ITC) at the end of 1986, and the realignment of depreciable tax lives, which took effect on January 1, 1987.

In the landmark Federal Tax Court case: Hospital Corp of America v. The Commissioner, in 1997, it was determined that the existing Tax Court Case Law for Investment Tax Credit was the basis for establishing and classifying 1245 Personal Property and 1250 Real Property for Cost Segregation Analysis purposes.

K&K professionals are well versed in ITC case law
and its applications for accelerated depreciation.

In 1987, the Modified Accelerated Cost Recovery System, MACRS, depreciation was aligned into three major categories:
1. Personal Property (1245) : 5 & 7-year life (200% DB)
2. Land or Site Improvements (1250) : 15-year life (150% DB)
3.Real Property (1250) S/L : 31.5-year life
(extended to 39 yr life in 1993) S/L

As a rule, for every $1 that is reclassified from 39-year to the 5-year category, the after-tax present value savings is approximately 20 cents. Also, if we move $1 from the 39-year to the 15-year category, the after-tax present value savings is approximately 11 cents. Remember, this is the case for both new, and, used or acquired properties.

Lookback Cost Segregation Analysis

As a result of Revenue Procedure 96-31 and several subsequent Rev. Proc.’s, the taxpayer is allowed “lookback” in time, and if a building has not already been analyzed for Cost Segregation, the taxpayer is allowed to prepare a Lookback Cost Segregation Analysis and claim all prior unclaimed depreciation on the building or buildings in the current year of filing. The taxpayer must file a form 3115 Change in Method to accompany the additional depreciation.

This Lookback Cost Seg Analysis is also known as a Catch-Up Depreciation Study. Guidelines for qualifying for a Lookback Cost Seg or a Catch Up Depreciation study include; the taxpayer must still own the property; the property has to have been placed in service on or after January 1, 1987. From January 1, 1987 through May 13, 1993 any building placed in service must be depreciated over 31.5 years. After May 13, 1993, any building placed in service must be depreciated over 39 years.

Lookback Cost Seg is a subset of Fixed Asset Reclass Analysis.

Detailed Information:
Fixed Asset Reclass Analysis
International Cost Segregation Services
Please contact us for details on any of our other services.

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	COST SEGREGATION Obtaining increased federal tax saving depreciation benefits through the proper classification of real and personal property within a building or buildings, is an economic must for anyone who builds or acquires real estate. A well documented Cost Segregation Analysis on a building or buildings can help the taxpayer identify and segregate the costs from the longer life 1250 Real Property, to the shorter-lived 1250 Property, and 1245 Personal Property classifications for accurate accelerated depreciation. Cost Segregation Analysis for federal tax depreciation purposes has been available to taxpayers since the demise of the Investment Tax Credit (ITC) at the end of 1986, and the realignment of depreciable tax lives, which took effect on January 1, 1987. In the landmark Federal Tax Court case: Hospital Corp of America v. The Commissioner, in 1997, it was determined that the existing Tax Court Case Law for Investment Tax Credit was the basis for establishing and classifying 1245 Personal Property and 1250 Real Property for Cost Segregation Analysis purposes. K&K professionals are well versed in ITC case law and its applications for accelerated depreciation. In 1987, the Modified Accelerated Cost Recovery System, MACRS, depreciation was aligned into three major categories: 1. Personal Property (1245) : 5 & 7-year life (200% DB) 2. Land or Site Improvements (1250) : 15-year life (150% DB) 3.Real Property (1250) S/L : 31.5-year life (extended to 39 yr life in 1993) S/L As a rule, for every $1 that is reclassified from 39-year to the 5-year category, the after-tax present value savings is approximately 20 cents. Also, if we move $1 from the 39-year to the 15-year category, the after-tax present value savings is approximately 11 cents. Remember, this is the case for both new, and, used or acquired properties. Lookback Cost Segregation Analysis As a result of Revenue Procedure 96-31 and several subsequent Rev. Proc.’s, the taxpayer is allowed “lookback” in time, and if a building has not already been analyzed for Cost Segregation, the taxpayer is allowed to prepare a Lookback Cost Segregation Analysis and claim all prior unclaimed depreciation on the building or buildings in the current year of filing. The taxpayer must file a form 3115 Change in Method to accompany the additional depreciation. This Lookback Cost Seg Analysis is also known as a Catch-Up Depreciation Study. Guidelines for qualifying for a Lookback Cost Seg or a Catch Up Depreciation study include; the taxpayer must still own the property; the property has to have been placed in service on or after January 1, 1987. From January 1, 1987 through May 13, 1993 any building placed in service must be depreciated over 31.5 years. After May 13, 1993, any building placed in service must be depreciated over 39 years. Lookback Cost Seg is a subset of Fixed Asset Reclass Analysis. Detailed Information: Fixed Asset Reclass Analysis International Cost Segregation Services Please contact us for details on any of our other services. Close Window