Save Even More with Cost segregation
About Bonus Depreciation
While many are concerned about the downfalls of the country’s economic slowdown, there is a silver lining. Congress has approved, as part of its national stimulus package, “bonus depreciation” for 2008. The benefits include the ability to take additional depreciation on qualifying property in 2008. The caveat is the very short window of opportunity to take advantage of this package.
Bonus depreciation isn’t a new concept. In fact, it has been used in several economic stimulus packages in the past, including the New York Liberty Zone, and the Gulf Opportunity Zone. Bonus depreciation allows qualified taxpayers to take an additional 50 percent depreciation of the basis of the qualifying property in the first year.
What Qualifies
To be eligible to claim bonus depreciation, property must be either; eligible for the modified accelerated cost recovery system (MACRS) with a depreciation period of 20 years or less, a water utility property, off-the-shelf computer software, or qualified leasehold property. For property to qualify for bonus depreciation, it must be acquired under a binding written contract entered into during 2008. Additionally, the taxpayer must begin the manufacture, construction or production of the property for the taxpayer’s own use during 2008. However, for property with a depreciation period of 10 years or longer, Congress extended the placed-in-service date through December 31, 2009. Construction started in 2007 does not qualify for this stimulus package.
Maximizing Bonus Depreciation with Cost Segregation
Cost segregation allows you to capture bonus depreciation by identifying property that falls into the recovery periods which are less than 20-years (i.e. 5, 7, 15, etc.). When the property is accurately identified in a cost segregation study, taxpayers experience accelerated depreciation by shortening the recovery period. The bonus depreciation benefit allows owner to depreciate 50% of the asset immediately!
Choosing the Right Consultant
Before beginning a cost segregation study and benefiting from both accelerated and bonus depreciation, make sure you work with a qualified cost segregation provider.
The IRS authored a Cost Segregation Audit Techniques Guide outlining the accepted criteria for a quality cost segregation study. Your provider/consultant should know and follow these guidelines when doing your cost segregation study. There are 13 parts to a quality cost segregation study:
Preparation by an individual with expertise and experience
Detailed description of the methodology
Use of appropriate documentation
Interviews conducted with appropriate parties
Use of a common nomenclature
Use of a standard numbering system
Explanation of the legal analysis
Determination of unit costs and engineering "take-offs"
Organization of assets into lists or groups
Reconciliation of total allocated costs to total actual costs
Explanation of the treatment of indirect costs
Identification and listing of section 1245 property
Consideration of related aspects
Additionally, there are nine principal elements of a quality cost segregation report. They are:
Summary Letter/Executive Summary
Narrative Report
Schedule Of Assets
Schedule Of Direct and Indirect Costs
Schedule Of Property Units And Costs
Engineering Procedures
Statement Of Assumptions And Limiting Conditions
Certificate
Exhibits
There are also six methods approved by the IRS when conducting a cost segregation study. These include the Detailed Engineering Approach from Actual Cost Records; Detailed Engineering Cost Estimate Approach; Survey or Letter Approach; Residual Estimation Approach; Sampling or Modeling Approach; “Rule of Thumb" Approach. Any of these approved methods is acceptable to the IRS.
About Bradley E. Arnowitz, P.A. & Associates
Bradley E. Arnowitz P.A. & Associates of Re/Max Beach Properties www.ArnowitzProperties.com is a full-service firm providing brokerage, development, sales investment, property management, asset management, and residential services for office, multi-family, industrial/commercial, residential, and retail properties.
Bradley E. Arnowitz, P.A. has been serving South Florida with Honesty, Integrity, & Results since 2001. www.HonestyInterityResults.com
For more information, visit Arnowitz & Associates on the web @ http://www.arnowitzproperties.com/ or contact the firm @ Re/Max Beach Properties, 1355 Alton Road, Miami Beach, FL 33139 or Re/Max Beach Properties, 672 E. Hallandale Beach Blvd, Hallandale Beach, FL 33009
ClientCare@ArnowitzProperties.com
24/7 (305)776.6113
http://www.arnowitzproperties.com/
