Want to save hundreds of thousands in tax dollars with an IRS Compliant tax mitigation strategy?
The Little Known IRS-Compliant Tax Mitigation Strategy For Cannabis Businesses
Reduce Your Income Tax Liability
Receive Money Back From The IRS
Retroactive Tax Savings
Cannabis Businesses Qualify For This IRS-Compliant Strategy
Benefits Of Cost Segregation
Maximize Your Tax Savings
Maximizing tax savings by adjusting the timing of deductions. When an asset’s life is shortened, depreciation expense is accelerated and tax payments are decreased during the early stages of a property’s life. This, in turn, releases cash for investment opportunities or current operating needs.
Create An Audit Trail
Improper documentation of cost and asset classifications can lead to an unfavorable audit adjustment. A properly documented cost segregation helps resolve IRS inquiries at the earliest stages.
Playing Catch-Up: Retroactively
Since 1996, taxpayers can capture immediate retroactive savings on property added since 1987. Previous rules, which provided a four-year catch-up period for retroactive savings, have been amended to allow taxpayers to take the entire amount of the adjustment in the year the cost segregation is completed. This opportunity to recapture unrecognized depreciation in one year presents an opportunity to perform retroactive cost segregation analyses on older properties to increase cash flow in the current year.
Additional Tax Benefits
Cost segregation can also reveal opportunities to reduce real estate tax liabilities and identify certain sales and use tax savings opportunities.
Cost Segregation Simplified
Cost Segregation is the IRS guide-lined method of re-classifying components and improvements of commercial and residential real estate resulting in reduced tax liability and increased cash flow. It is applicable to both owners and lessees.
A third party certified study identifies, values and separates 5, 7 and 15 year depreciable life personal property from 39 or 27.5 year, depreciable life real property (dependent on if it is commercial or residential real estate).The net result creates significant acceleration of available tax deductions.
IRS guidelines allow this technique to be applied to newly built and existing buildings, irrespective of age. However, the building must have been placed in service no earlier than 1987. Number of years owned by current owner, prior renovations and future renovation plans are just some of the considerations used to determine whether a cost segregation study makes economic sense.
The technique has been widely used since 1997 as a result of two landmark tax court cases in which both Walgreen’s and Hospital Corp of America prevailed against the IRS. Traditionally, Big 4 CPA firms engineering departments have used cost segregation with their large clients. Cannabiz Insiders now cost effectively delivers this service to the middle and smaller markets as well.
Properties may be owned in a variety of entities. Most common are LLC’s and S-Corps. If an owner of an LLC which holds the property leases it to an operating entity typically an S-Corp which they also own, losses and gains are all active, because for tax purposes these common owned entities may be grouped.
Active and Passive
If an individual owns a single vacation villa and rents it out, typically the losses are considered passive. However, passive losses from real estate may be an offset to passive gains from other types of investments. Also, if an owner is classified as a real estate professional, which is a legal definition for tax purposes, all gains and losses are considered active.
The certified Cost Segregation company completes a no-cost estimate (Order of Magnitude Study) that usually is within 15% of the results of a certified study. The client will always be presented with a fixed, flat fee bid prior to engagement. This fee is based on size and complexity of the project. Net Present Value analysis usually shows benefits to cost ratios ranging from 10:1 to 30:1, based upon asset value and type.