Accelerated Depreciation

General Real Estate Investing
1

Hi,

By doing accelerated depreciation on commercial real estate, doesn’t one pay just the tax later when selling the property?

Thanks
Alvin

2

Cost segregation is an innovative tax strategy
that can reduce income tax and increase
cash flow.
Through cost segregation, companies
and individuals who have constructed,
purchased, remodeled or expanded any
kind of real estate property can accelerate
depreciation deductions and DEFER
federal and state income taxes.
Cost segregation is a tried-and-true
technique used since the early 1960s.
More than 300 court cases and Internal
Revenue Service (IRS) rulings have
upheld cost segregation as the method
for legally and fairly segregating the cost
of assets.
Cost Segregation: How It Works … Explain later

THIS is want a CPA has to say. Don not talk my word for it. Talk to your CPA, real estate attorney and your irs attorney or the IRS.

3

If you pair cost segregation with 1031 exchanges, you keep deferring the taxes until you die…then your heirs receive it with the new basis and they continue deferring. Very interesting strategy. I look forward to using it some day.

4

Consult a CPA; accelerated depreciation was abolished in the Tax Reform Act of 1986.

Regards,

Scott Miller

5

True on the abolishment of “accelerated depreciation” by the TaxReform Act of 1986. However, there was a 1987 tax court case ruling in which the taxpayer was successful in defending an engineered based cost segregation. You can’t just say $1m of my property is classifed as personal property so I can depreciate it in 5 yrs. You need a qualified professional (engineer) to determine what can be labeled as personal property and what can be real property.

I agree with Scott to consult with a CPA just make sure the CPA understands Real Estate Investing. I’m sure most will just state the Tax REform Act of 86, but the CPA with RE background will be aware of the 1987 ruling.