Discussion:Cost segmentation / Segregation / Section 1031 Exchange...
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| {{ForumReplyPost|UserID=Kevinh5|Date=5 August 2008|Text=at least your fee can now be higher - you've got to do more work. Thank the segregationists for that!!!!}} | {{ForumReplyPost|UserID=Kevinh5|Date=5 August 2008|Text=at least your fee can now be higher - you've got to do more work. Thank the segregationists for that!!!!}} | ||
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| + | {{ForumReplyPost|UserID=Neil Mink|Date=5 August 2008|Text=LOL--thanks Kevin; I suppose I should be thankful that at least used a QI ;)}} | ||
Revision as of 21:44, 5 August 2008
Discussion Forum Index --> Basic Tax Questions --> Cost segmentation / Segregation / Section 1031 Exchange...
Discussion Forum Index --> Tax Questions --> Cost segmentation / Segregation / Section 1031 Exchange...
| 5 August 2008 | |
| A new client showed up today and told me they had executed a Section 1031 exchange. On the face it appeared as if the transaction was handled properly. However, as we were closing they mentioned that after the fact they had a cost segmentation study done on the replacement property (it was a commercial building and land). Am I way off base here or would this nullify the intent of the 1031 exchange? The exchange was building and land for building and land--and to me by doing cost segmentation you are saying that a portion of the "building" is 5-year and 7-year property. Anyone ever run into this before? I'm wondering if we should just ignore the cost segmentation study at this point. | |
| 5 August 2008 | |
| as a CPA I don't think that Circular 230 allows you to ignore the implication of information furnished by the client.
You have to separate the 1031 out into parts: like kind for like kind. thus you may have 7 or 8 1031's - assuming he had §1245 property relinquished | |
| 5 August 2008 | |
| the good news is that his cost segregation study surely allows a faster write off of the boot than he would have had without it.
the bad news is that he probably woulnd't have had boot without the cost segregation study. | |
| 5 August 2008 | |
| Kevinh5, thank you for your thoughts. I agree with what you said about Circular 230. In this case I'm saying to not use the cost segmentation data because there is no rule that says you have to segment costs. I would just depreciate the building over 39 years. Or are you saying that I am now locked into to using the cost segmentation since it was done? | |
| 5 August 2008 | |
| 10.34 Standards for advising with respect to tax return positions and for preparing or signing returns
(a) Realistic possibility standard. A practitioner may not sign a tax return as a preparer if the practitioner determines that the tax return contains a position that does not have a realistic possibility of being sustained on its merits (the realistic possibility standard) unless the position is not frivolous and is adequately disclosed to the Internal Revenue Service. A practitioner may not advise a client to take a position on a tax return, or prepare the portion of a tax return on which a position is taken, unless-- (1) The practitioner determines that the position satisfies the realistic possibility standard; or (2) The position is not frivolous and the practitioner advises the client of any opportunity to avoid the accuracy-related penalty in section 6662 of the Internal Revenue Code by adequately disclosing the position and of the requirements for adequate disclosure. (b) Advising clients on potential penalties. A practitioner advising a client to take a position on a tax return, or preparing or signing a tax return as a preparer, must inform the client of the penalties reasonably likely to apply to the client with respect to the position advised, prepared, or reported. The practitioner also must inform the client of any opportunity to avoid any such penalty by disclosure, if relevant, and of the requirements for adequate disclosure. This paragraph (b) applies even if the practitioner is not subject to a penalty with respect to the position. (c) Relying on information furnished by clients. A practitioner advising a client to take a position on a tax return, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete | |
| 5 August 2008 | |
| I am saying that the Cost Segregation report clearly says that some of what he bought as replacement property is NOT real estate. | |
| 5 August 2008 | |
| Kevinh5, I see what you are saying now--sorry. When all was said in done very little of the replacement property was not real estate--less than 3%. To me the cost of the segmentation didn't produce much of a benefit in this case. | |
| 5 August 2008 | |
| at least your fee can now be higher - you've got to do more work. Thank the segregationists for that!!!! | |
| 5 August 2008 | |
| LOL--thanks Kevin; I suppose I should be thankful that at least used a QI ;) | |
