Cost Segregation
Griffin Valuation Group has the vast experience (25+ years!) and qualifications needed to lower your tax expenses and increase cash flow. Put that money back in the company's pockets where it belongs!
Cost segregation and purchase
price allocations offer significant economic
benefits to commercial and industrial property
owners. While the process differs for each, the
advantages are the same… to lower tax burdens. We also specialize in property tax
consulting.
A Cost Segregation analysis by Griffin Valuation
Group's team of engineers and accounting experts
can uncover substantial tax savings and improve
cash flow -- two of the most important things an
owner can do.
Big-4 experience working on major Fortune 500 companies since the 1980's brings exceptional
success and knowledge to property owners nationwide. We have no overhead so we're able to offer low
prices to make cost segregation viable for middle-market corporations and individuals throughout the U.S.
Tax Benefits of Cost Segregation
Cost segregation studies and purchase price
allocations identify and reclassify building
components into the appropriate MACRS tax
depreciation categories. We identify, using IRS
and Tax Court decisions, those assets that
qualify for accelerated depreciation through the
use of shorter tax life depreciation schedules.
- Maximize annual depreciation
- Reduce upfront income tax costs
- Lower cost of capital
- Improve cash flow
- Improve shareholder value.
- Ability to write-off individual assets in future when removed.
- Purchased real property since 1987
- Constructed a new facility since 1987
- Renovated, expanded or restored an existing property
- Installed leasehold improvements in an existing building
- Paid federal income tax on these properties (Not in NOL's)
For every $1 Million of reclassified cost (39-years to 5, 7 and 15-year tax depreciation lives) the net present value after tax benefit can exceed $200,000! This increase in cash flow puts money back into the company that can be used for other investments or expenses.
Quotes from the IRS's Cost Segregation Manual: "In order to compute depreciation using proper class lives and recovery periods, assets must be assigned to the proper asset classes. Cost segregation studies generally produce listings or groups of assets, based on asset classes under ACRS (Accelerated Cost Recovery System) or MACRS (Modified Accelerated Cost Recovery System)." (Click to open IRS Source of Cost Segregation Quote)
"In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods. Thus, property must be separated into individual components or asset groups having the same recovery periods and placed-in-service dates in order to properly compute depreciation." (Click to Open IRS Source of Cost Segregation Quote)
IRS guidelines for cost segregation studies recommend an engineered approach coupled with the tax accounting expertise needed regarding federal taxes and depreciable lives. Purchase price allocations (cost segregation on acquired properties) require the expertise of an appraiser and valuation expert (rather than just an engineer) in combination with the real estate tax accounting depreciation specialist.
Griffin Valuation Group, Ltd. offers all these required experienced professionals in one organization. It is imperative to have the team approach of experts in property valuation and appraisal, tax depreciation specialists and construction cost estimating. One or the other alone cannot provide an IRS ready, complete and thorough product with the maximum tax benefit and supportability. Griffin Valuation Group provides the complete team and complete package -- leaving nothing undone.
For even more references and documentation by the IRS on the utilization and validity of Cost Segregation, see our Cost Segregation Links page!
IRS rules were amended in 1996 to allow owners to correct the tax lives for assets placed in service back to 1987. Griffin Valuation Group can correct the tax lives by doing individual cost segregation studies for older buildings and also correct the tax lives for all other Furniture, Fixtures and Equipment (FF&E) which may have been improperly classified in prior years on the tax depreciation schedule.
These accounting method change analyses are often called “catch-up” depreciation studies. The result of our studies can be taken as a one year lump sum adjustment on the corporate tax return. No amended tax returns need be done. We perform the entire depreciation analysis of all components and provide a self-contained, ready-to-use product, including: a written report listing methodologies used and the detailed cost spreadsheets formatted for use as the Form 3115 attachments.
Griffin Valuation Group, Ltd. can evaluate your entity and provide a free assessment of the merit of a study. Email us today!
Most real property has a tax depreciation recovery period of 39 years while personal property is depreciated over 5 or 7 years. A cost segregation study will reallocate appropriate assets to 5, 7 or 15 year lives based on case law and IRS recommendations.
Examples of personal property include many decorative improvements and millwork, and special purpose electrical and mechanical systems.
See the IRS discussion of what is Sec. 1250 property (39-year) versus Sec. 1245 personal property here: IRS's Cost Segregation Legal Framework
Typical percentage of construction and acquisition costs that can be reclassed into shorter tax lives ranges from 12% to over 30% of the total cost! (depends on factors such as amount of buildouts and land values)
Click here for more IRS info: Sample Listing of Real Vs. Personal Property from the IRS: Click Here for the IRS's Typical list
- Complete blueprint and specifications review
- Detailed construction cost analysis by each asset and sub (not residualed like many others do!)
- Assignment of proper depreciable tax lives
- Tax research to back-up our findings
- Valuation of land, building and improvements for acquisitions
- Preliminary findings review with client
- Final written report and schedules ready for immediate implementation
- Free audit support
Our reports and experience exceed IRS requirements! We have passed audits 100% of the time! Our Cost Segregation FAQ page has answers to some common questions concerning cost segregation studies.
Griffin Valuation Group exceeds the necessary experience, technical skills and service commitment to provide the best solution you are looking for. We promise the best value you will find in the market today, and we do not charge additional expenses on top of our project fees. We also provide you with the highest quality product at a low reasonable price.
We would enjoy speaking with you to go over the details and to give you a free estimate of the tax benefit you can enjoy. Give us a call or send an email soon!
Email us anytime at griffin@griffinvaluation.com for a Free Estimate of Tax Benefits or call us soon at (312) 324-4484.
The benefits of the larger tax deductions from cost segregation includes:
- Maximize annual depreciation
- Reduce upfront income tax costs
- Lower cost of capital
- Improve cash flow
- Improve shareholder value.
- Ability to write-off individual assets in future when removed.
Cost segregation studies are a wise investment for owners that have:
- Purchased real property since 1987
- Constructed a new facility since 1987
- Renovated, expanded or restored an existing property
- Installed leasehold improvements in an existing building
- Paid federal income tax on these properties (Not in NOL's)
For every $1 Million of reclassified cost (39-years to 5, 7 and 15-year tax depreciation lives) the net present value after tax benefit can exceed $200,000! This increase in cash flow puts money back into the company that can be used for other investments or expenses.
What does the IRS say about using Cost Segregation?
Quotes from the IRS's Cost Segregation Manual: "In order to compute depreciation using proper class lives and recovery periods, assets must be assigned to the proper asset classes. Cost segregation studies generally produce listings or groups of assets, based on asset classes under ACRS (Accelerated Cost Recovery System) or MACRS (Modified Accelerated Cost Recovery System)." (Click to open IRS Source of Cost Segregation Quote)
"In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods. Thus, property must be separated into individual components or asset groups having the same recovery periods and placed-in-service dates in order to properly compute depreciation." (Click to Open IRS Source of Cost Segregation Quote)
IRS guidelines for cost segregation studies recommend an engineered approach coupled with the tax accounting expertise needed regarding federal taxes and depreciable lives. Purchase price allocations (cost segregation on acquired properties) require the expertise of an appraiser and valuation expert (rather than just an engineer) in combination with the real estate tax accounting depreciation specialist.
Griffin Valuation Group, Ltd. offers all these required experienced professionals in one organization. It is imperative to have the team approach of experts in property valuation and appraisal, tax depreciation specialists and construction cost estimating. One or the other alone cannot provide an IRS ready, complete and thorough product with the maximum tax benefit and supportability. Griffin Valuation Group provides the complete team and complete package -- leaving nothing undone.
For even more references and documentation by the IRS on the utilization and validity of Cost Segregation, see our Cost Segregation Links page!
What can be done for properties purchased or constructed in prior years?
IRS rules were amended in 1996 to allow owners to correct the tax lives for assets placed in service back to 1987. Griffin Valuation Group can correct the tax lives by doing individual cost segregation studies for older buildings and also correct the tax lives for all other Furniture, Fixtures and Equipment (FF&E) which may have been improperly classified in prior years on the tax depreciation schedule.
These accounting method change analyses are often called “catch-up” depreciation studies. The result of our studies can be taken as a one year lump sum adjustment on the corporate tax return. No amended tax returns need be done. We perform the entire depreciation analysis of all components and provide a self-contained, ready-to-use product, including: a written report listing methodologies used and the detailed cost spreadsheets formatted for use as the Form 3115 attachments.
Griffin Valuation Group, Ltd. can evaluate your entity and provide a free assessment of the merit of a study. Email us today!
Overview of How Assets Are Reclassified Into Shorter Tax Depreciation Lives:
Most real property has a tax depreciation recovery period of 39 years while personal property is depreciated over 5 or 7 years. A cost segregation study will reallocate appropriate assets to 5, 7 or 15 year lives based on case law and IRS recommendations.
Examples of personal property include many decorative improvements and millwork, and special purpose electrical and mechanical systems.
See the IRS discussion of what is Sec. 1250 property (39-year) versus Sec. 1245 personal property here: IRS's Cost Segregation Legal Framework
Typical percentage of construction and acquisition costs that can be reclassed into shorter tax lives ranges from 12% to over 30% of the total cost! (depends on factors such as amount of buildouts and land values)
Click here for more IRS info: Sample Listing of Real Vs. Personal Property from the IRS: Click Here for the IRS's Typical list
A Griffin Valuation Group, Ltd. cost segregation study includes:
- Complete blueprint and specifications review
- Detailed construction cost analysis by each asset and sub (not residualed like many others do!)
- Assignment of proper depreciable tax lives
- Tax research to back-up our findings
- Valuation of land, building and improvements for acquisitions
- Preliminary findings review with client
- Final written report and schedules ready for immediate implementation
- Free audit support
Our reports and experience exceed IRS requirements! We have passed audits 100% of the time! Our Cost Segregation FAQ page has answers to some common questions concerning cost segregation studies.
Griffin Valuation Group exceeds the necessary experience, technical skills and service commitment to provide the best solution you are looking for. We promise the best value you will find in the market today, and we do not charge additional expenses on top of our project fees. We also provide you with the highest quality product at a low reasonable price.
We would enjoy speaking with you to go over the details and to give you a free estimate of the tax benefit you can enjoy. Give us a call or send an email soon!
Email us anytime at griffin@griffinvaluation.com for a Free Estimate of Tax Benefits or call us soon at (312) 324-4484.