What Is a Cost-Segregation Study (CSS)?

PART II OF II... THE END...

When Should a Cost-Segregation Study Be Prepared?

1. For new construction, almost anytime. Investors may find new construction the easiest property on which to prepare a CSS since the architect and construction documents are readily available. Another source for this information is the builder which has detailed cost information in its bid sheets. Ask the builder for the “G702 payment application form.”

2. On existing buildings at the time of purchase. When economically feasible, the fiscally conservative investor may want a CSS to be prepared when the property is acquired. Studies can be, and often are, done on property placed in service in prior years (whether by the client or by another owner).

3. On existing buildings after a year of purchase. Even if the client acquired the property in a prior year, a CSS may, in addition, increase the current and future amount of depreciation, and allow the client to take catch-up deductions in the current year for depreciation not claimed in prior years. As if a gift from IRS heaven, the §481(a) adjustment for missed depreciation can be claimed in the current year without the need for filing amended returns, worrying about the statute of limitations for prior years, or paying for a letter ruling, as this change in method of accounting is free and automatic. Use Form 3115 to catch up on missed depreciation.

My name is Paul Levine, and I am a Commercial Realtor, a Residential Realtor of luxury homes in the greater Los Angeles area, a Real Estate Advisor, an Investment Advisor, and an Income Tax Consultant!!! You can call me at (818) 298 – 4000 after 10 AM Pacific Time Monday through Friday and, yes, even on the weekends. Or you can send an email to me at [email protected] and I will always try and answer you in a timely manner.