M id A tlantic Mid Atlantic
Real Estate Journal — Professional Services — November 28 - December 11, 2014 — 3A l The Road to Recovery 2 5, 2013 — 1
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T ax I ssues By Bruce A. Johnson, Bedford Cost Segregation Permanent repair versus capital regulations t A i ss es By Bruce A. Johnson, Bedford Cost Segregation, LLC t i i l l ti
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of these rules. Not to be overstated, planning for the use of these tools is critical to ensure proper application of them as well as claiming the full benefit provided. Recently, one of Bedford’s clients was able to justify writing-off the remaining depreciable cost basis of a building assets that were replaced during a complete building expansion and ret- rofit project. The result was the ability to dispose of over $1,000,000 in existing build- ing cost basis, generating over $400,000 in federal of these tools is critical to ensure proper application of them as well as claiming the full benefit provided. Recently, one of Bedford’s clients was able to justify writing-off the remaining The benefit of these regulations pair quite well with other depreciation derived federal tax incentives such as co t segregati n and EPAct 179D initiatives. The combined effects can be substantial, and perhaps make a marginal renovation project exceed the required fin ncial performance r quirements. tax savings. This deduction represented over 10% of the renovation projects capital depreciable cost basis of in- terior lighting systems that were replaced during a full cost, which greatly enhanced the clients return on invest- ment. In addition, the client was able to clear up poten- tial ghost assets on their tax books, which is one of building energy retrofit proj- ect. The result of this effort was the generation of an ad- ditional $450,000 deduction
the objectives of these new regulations. The benefits of these regu- or roughly a $150,000 tax savings. This deduction rep- resented almost 10% of the projects capital cost, which greatly enhanced the clients return on investment. In addition, the client was able to clear up potential ghost assets on their tax books, which is one of the objectives of these new regulations. The benefits of these regu- lations pair quite ell ith other depreciation derived federal tax incentives such as cost segregation and EPAct 179D initiatives. The combined effects can be sub- lations pair quite well with other depreciation derived federal tax incentives such as cost segregation and EPAct 179D initiatives. The com- bined effects can be substan-
he IRS issued the fi- nal pieces of its long awaited permanent his past September, the IRS issued its long a aited per anent
stantial, and perhaps make a marginal renovation project exceed the required financial performance requirements. In closing, these regula- tions can provide a substan- tial benefits to tax payers going forward. In preparing for your 2013 tax filings, be sure to cover this topic with your tax professionals and consultants to start the process of implementing a strategy that is right for you and your organization. Bruce A. Johnson is a partner with Bedford Cost Segregation, LLC. n tial, and perhaps make a arginal renovation project exceed the required financial perfor ance require ents. In closing, these regula- tions can provide a substan- tial benefits to tax payers going for ard. In preparing for your 2014 tax filings, be sure to cover this topic ith your tax professionals and consultants to start the process of i ple enting a strategy that is right for you and your organization. ruce A. Johnson is a partner with Bedford ost Segregation, LLC. n
repair ver- sus capital regulations t h i s p a s t s u m m e r . These regu- lations ush- er in a new era of deci- s i on mak - repair ver- sus capital regulations. These regu- lations will affect most b u s i n e s s o w n e r s , particularly those with commercial
“While these regulations have added a level of co plexity to tax payer’s business operations, they do provide potentially significant opportunity to reduce tax liabilities. The best way to take advantage of these tools is to plan ah ad of any investments that are foreseen.”
Bruce Johnson Bruce A. Johnson
ing for US tax payers the own commercial real estate. These new, more complicated rules will require more tax resources for compliance, but also hold a trove of po- tentially significant benefits. The regulations officially take effect on January 1, 2014, so it will be important for this to be a tax planning topic of discussion with busi- ness owners and their CPA’s. The compliance aspect of these rules may require ex- isting expensing policies to be altered to meet the new outlined processes, and perhaps the need to make elections for things such as for partial disposition or one of the levels of de mini- mus, which creates a process which allows a tax payer to expense all items under the regulations specified level; $5,000 or $500. While these regulations have added a level of com- plexity to tax payer’s busi- ness operations, they do provide potentially signifi- cant opportunity to reduce tax liabilities. The best way to take advantage of these tools is to plan ahead of any investments that are fore- seen, be it the construction of a new facility, purchase of a new property or improve- ment to an existing one. An example of how tax pay- ers can leverage these rules could be the writing-off of assets currently capitalized that are being replaced as part of a renovation proj- ect. Another would be the preparation of asset descrip- tions to comply with the regulations new concept of unit of property. The unit of property is the amount you compare the current expense to in determining whether to expense new costs or capital- ize the new and dispose the replaced/retired asset. These are just a few of the many strategies that can be employed to take advantage real estate, creating new ar- eas of compliance as well as opportunities to take advan- tage of potential benefits. The regulations officially take effect on January 1, 2014, so it will be important for this to be a tax plan- ning topic of discussion with business owners and their CPA’s. The compliance aspect of these rules may require existing expensing policies to be altered to meet the new outlined processes, and perhaps the need to make elections for things such as for partial disposition or one of the levels of de mini- mus, which creates a process which allows a tax payer to expense all items under the regulations specified level; $5,000 or $500. While these regulations have added a level of com- plexity to tax payers business operation’s, they do provide potentially significant op- portunity to reduce tax lia- bilities. The best way to take advantage of these tools is to plan ahead of any invest- ments that are foreseen, be it the construction of a new facility, purchase of a new property or improvement to an existing one. An example of how tax pay- ers can leverage these rules could be the writing-off of assets currently capitalized that are being replaced as part of a renovation proj- ect. Another would be the preparation of asset descrip- tions to comply with the regulations new concept of unit of property. The unit of property is the amount you compare the current expense to in determining whether to expense new costs or capital- ize the new and dispose the replaced/retired asset. These are just a few of the many strategies that can be employed to take advantage of these rules. Not to be over- stated, planning for the use
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