Cost segregation studies can offer incredible tax benefits from accelerated depreciation for those who purchase or construct real estate. Cost Segregation can be a great tax tool to improve cash flow which can then be utilized for other projects or investments. To realize the maximum benefit, it is important to correctly calculate the accelerated depreciation and substantiate your cost segregation benefit.
At Calvetti Ferguson, the Cost Segregation Study process revolves around three main phases.
Phase 1: Free Initial Consultation and Benefit Estimate
When a taxpayer approaches us about any tax incentive, our initial role is to make sure the tax incentive truly offers value to the taxpayer. We evaluate every taxpayer’s unique tax and building scenario before engaging in a study. Our ultimate objective during this phase is to provide a fee and benefit estimate so the taxpayer can evaluate if the cost-benefit is right for them.
Our cost segregation experts evaluate the client’s opportunity by analyzing a few key pieces of information such as the most recent tax return, depreciation schedule, closing statement, and when the building was placed in service. From this documentation and a brief conversation, we will generate an estimated range of benefit and a fee for the services to be completed.
Phase 2: Documentation and On-Site Verification
Once an agreement is in place, we will request supporting documentation that may include, but is not limited to:
- Purchase contract
- Closing statement
- General ledger spreadsheet
- Final pay application
- Plat map
- Tax assessor document
- Appraisal
- Inspection report
- Utility bills
The entirety of this list may not be available or necessary; however, these documents are a part of our due diligence to ensure the study is fully supported and substantiated. Once we have received and reviewed all the documentation available, we will conduct an on-site verification to survey the interior and exterior of the property, inventory the components of the property, and photograph the various spaces. An on-site visit is a key component of a quality cost segregation study and is necessary to support the construction cost estimating used to segregate the various building components. During the visit we request that someone is available for questions, however, most of the work is done autonomously with little interruption to surrounding operations.
Phase 3: Construction Cost Estimating and Final Report
The final phase of the cost segregation study consists of evaluating the documentation, photos, and property data. Our engineers will calculate the value of the building components and reclassify these components to their appropriate asset life. Our team will build out a final report and the necessary tax filing information for review by the taxpayer. Upon approval, this report is finalized and delivered to mark the conclusion of the study.
Contact Us
Calvetti Ferguson works with middle-market companies, private equity firms, and high-net-worth individuals nationwide. Regardless of the complexity of the compliance, assurance, advisory, or accounting need, our team is ready to help you. Please complete the form below, and we will follow up with you shortly.