Cost Segregation

Working with CPA & Tax Professionals

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

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”

Best Economic Results

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

Sample 3115

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

Net Operating Loss

Allowable tax deductions are greater than taxable income resulting in negative taxable income

Business owner can “carry back” loss 2 years

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.

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

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

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

CPA Partnerships

Provide access to multiple commercial property owners

Client trust has already been established

CPA Partnerships

Marketing to CPAs- CPA/Tax Professional Conventions- Visiting Local CPA Firms- Connect with CPA through current clients- Market to your current CPA

CPA Mkt Material

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

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

CPA Partnerships

Creates Revenues for CPA- Option to add additional fees- Creates added service for CPA firm- Differentiates themselves for the

competition