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Cost Segregation

Cost Segregation

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Cost Segregation

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  1. Cost Segregation Working with CPA & Tax Professionals

  2. Business with CPAs • Need a solid understanding of Cost Segregation • If not, could lose their trust quickly • Need to understand personality traits typically associated with CPAs • Enhances communication

  3. CPA • Client says his CPA has already performed Cost Segregation • IRS specifically asks for a third party engineering firm • Engineered study provides best economic results • IRS Quote: “Cost segregation is a factually intensive determination that is based on complex tax law and engineering analysis”

  4. 3115 Form • Change in Accounting Form • Only needed for properties owned for over 1 year • States that you intend to change from old method of depreciation to accelerated depreciation using cost segregation

  5. 3115 Form • Catch Up Depreciation • Allows taxpayer to recalculate depreciation from the first day placed in service and take additional depreciation in the first year of application • Difference between what was deducted and what could have been deducted is knows as an IRS Section 481(a) adjustment

  6. Net Operating Loss • Allowable tax deductions are greater than taxable income resulting in negative taxable income • Business owner can “carry back” loss 2 years

  7. Passive Loss • IRS states that passive losses can only be offset by passive income • Exception: Rental real estate losses up to $25,000 may be deducted for individuals whose gross income is less than $100,000.

  8. Real Estate Professional • Taxpayer spends the majority of his time in rental real estate • More than ½ personal services related to real estate business • Taxpayer spends more than 750 hours of material participation in real estate business • Losses are no longer passive

  9. Grouping of Activities • If businesses form an economic unit, C and S Corporations and Partnerships/LLCs can group them into a single activity • Ex. – Owner holds building in one LLC and operations of business in a separate LLC

  10. Personality Traits • “C” Personality • Perfectionist – prefer a factual approach • Respect precise & logical explanations • Strengths – accuracy through detailed research • Weakness – fear criticism • Leads to a fear of change

  11. CPA Partnerships • Provide access to multiple commercial property owners • Client trust has already been established

  12. CPA Partnerships • Marketing to CPAs • CPA/Tax Professional Conventions • Visiting Local CPA Firms • Connect with CPA through current clients • Market to your current CPA

  13. CPA Partnerships • CPA BIQ System • Building Investment Quotient • Allows CPA instant access to analysis • You are sent an e-mail each time an analysis is created

  14. CPA Partnerships • CPA BIQ System • You can create a user name and password for CPA or tax professional • CPA or tax professional can log on and create an analysis for their clients • You will receive an e-mail alerting you an analysis has been created

  15. CPA Partnerships • Creates Revenues for CPA • Option to add additional fees • Creates added service for CPA firm • Differentiates themselves for the competition