Depreciation: Cost Segregation

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Cost Segregation is the separation of 1245 personal property, 1250 real property and land. (Land is not depreciable.) A cost segregation study can be done with new construction, purchase of existing building (purchase price allocation) or previously purchased construction (look back study). Depreciate each components of building according to it's life (see how to deprecation IRS).
Personal property 3, 5, 7 years
Land improvement 15 years
Real Property 27.5 years residential, 39 years commercial.
Each of these will be allocated with overheads such as architect fee, government permits, general contractor fee and others.
New construction, cost segregation will be done base on actual costs since all costs can be accountable from the bills.
Purchase of existing building (purchase price allocation) will require to look at building's age, condition, and segregation each component according valuation manual such as R.S. Means and/or Marshall & Swift.
Previously purchased construction (look back study) is very similar to purchase price allocation, but it needs an additional filling call "Application for change in accounting method" Form 3115
Cost Segregation will accelerate depreciation, give tax payer the benefit of better cash flow and return on investment.

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