All Forum Posts by: Bill S.

A CPA should confirm this, but my understanding is if it was closed and vacant, and not 'in service' at the time of purchase, it was essentially acquired for the land value. With no income producing building, there is nothing you can do.

However, if the gas station was 'in service' (i.e. - had a tenant and paying rent), then it later went 'out-of-service' - even if only a few months - then you could do cost segregation on it. More importantly the tear down of the entire building basis could be applied as retirement or disposition of asset expense. This would be far more valuable to you than the cost seg and bonus depreciation. 

Hello @Deepti Mikki with cost seg experts like @Julio Gonzalez and @Yonah Weiss weighing in, you are getting good advice. Yonah is right to point out that every class of commercial or income real estate can utilize cost segregation. And that every property type can vary in the range of tax benefits offered. Lots of factors come into play. 

Even within the same category like hotels, the range can be from the low to mid 20's% range to well into the 40's% based on the construction methods and materials, land improvements and the level of the amenities. For example, a Red Roof Inn will be far different than a Marriott Resort hotel. So giving a rule of thumb is good, but there are many variables that make up the amount of short life components within a specific property.  

@Jesse Daconta, thanks for the shout out!

@Ashraf Ayyash feel free to DM me to discuss your property and personal needs. 

@Michael Plaks, yes for nonresidential only, thanks for clarifying... hence my disclaimer on the circumstances. The assumption on BP should be residential/apartments of some sort. Kumar wasn't clear on property type in the initial question, though I should have been clear. Bel well.

@Mayer M. FYI, a Cost Segregation Study will "not" increase your chances of an IRS audit. It is standard practice and component level depreciation is encouraged by the IRS.

Though it is very important to track you time as you go along. An audit could be triggered by a number of factors that don't line up when run through the IRS's system, and create an exception. Things in your tax filing need to be really off to do this.

Being a REP/active participant and using cost seg to offset a spouses (or your own if that's all you do) W-2 wages is fairly common practice. Though, it is always better to be "safe than sorry". If you are audit for some reason, if you then slap together a spreadsheet to record time, the auditors will know right away. Track weekly like a time sheet.

@Kumar Gaurav Let's say I upgrade my HVAC to replace old if install new condensation units worth $10000 just for the sake of numbers, how does it impact my depreciation...

The Tax Cuts Jobs Act (TCJA) allows HVAC, Roof and Security Systems to fall into the 179 expense. So your $10K HVAC would not impact depreciation at all, and you can expense it right away. This is better! If you knew the remaining value/life of your existing HVAC units (via a cost seg study), then you could dispose/retire that asset as well (another expense). This is actually a requirement of the Tangible Property Regs. If you don't dispose of replaced items, then you will end up with ghost assets.

But your HVAC was one generic example without complete context, all components need to be analyzed based on the specific tax code, perhaps building type, your ownership/tax structure, etc.

@Jesse Daconta thanks for the shout out.

@Jesse Daconta thanks for the shout out.

Good points made by Tyler and all, we are in unique times. The economy is/will be highly effected in the coming year, possibly further. Capturing the benefits of cost segregation in 2019 could prove very beneficial - especially now with the extension. I have even heard some consider analyzing the impact of depreciation on their 2018 taxes (if they had a large tax bill, and did not use cost segregation on a 2018 acquisition) to see if this deduction could generate a refund. If so, possibly amending their return and claiming the refund. I am more inclined of the 'look-back' study and filing the 3115, and not amending, but in potentially this could be possible for the right circumstances.

@Spencer Gray I have to disagree with Natalie on the $350 Gain. While I am not a CPA, here's how I understand that the calculations @Scott Blackwill and you are requesting will work.

• $200K acquisition, sold for $500K: Capital Gains tax rate on the $300K Capital Gain taxed at capital gains rate
• $200K acquisition, current basis at $150K due to depreciation: $50K Recapture taxed at your ordinary income rate

Maybe Natalie was answering something else - as there is a taxable event on the entire $350K, it's just how it will be taxed that is important to understand. Again, consult your tax professional.