How to save millions with accelerated asset depreciation

Real Estate Weekly, Jan 10, 2007

A new book authored by Grant Keppel, CPA, national director of Cost Segregation Partners, Real Estate Cost Segregation: A Practitioners Guide puts cost segregation in its larger depreciation context and discusses the legal authority that support cost segregation.

Cost segregation allows property owners to qualify for substantial state and federal tax savings when real estate holdings qualify for accelerated depreciation, meaning larger tax deductions over a shorter period.

Said Keppel: "The benefits of larger tax deductions include increased cash flow and lower cost of capital in the first few years following a construction project or acquisition."

Real Estate Cost Segregation shows how to identify properties that are valid prospects for cost segregation and provides printouts of sample spreadsheets used to determine whether a cost segregation study will be cost-effective. Generally, the benefits are at least ten-to-one in relation to the cost associated in preparing the study and report. The book also outlines what the IRS seeks in a quality cost segregation study and report.

Keppel walks the reader through the actual execution of a cost segregation study and report, illustrating it as a multi-step process as well as a multi-party process involving a tax practitioner, engineering, architectural, and other experts.

"CSS isn't risky or aggressive," said Keppel. who claims that hundreds of property owners are leaving dollars on the table by not pursuing this IRS-approved tax strategy.

Cost segregation studies can be prepared for office buildings, manufacturing plants, multi-family housing, shopping centers, restaurant and retail chains, and a variety of other real estate properties. The application of cost segregation is vast, in that any constructed or acquired buildings placed in service since January 1, 1987 can benefit from a cost segregation study. The new IRS revenue procedure in 2004 gave practitioners the ability to perform cost segregation studies without the need to amend tax returns.

Recently enacted tax laws are also addressed in the book. Noted Keppel, "Reflecting an inclusive and completely updated grasp of IRS requirements is critical to the success of cost segregation studies." In the course of a recently-completed fifty-city tour of speaking engagements and seminars, Keppel has fielded numerous questions from property owners and developers about pursuing cost segregation savings for their existing properties and those in development.

"This book was written in response to those requests," he explained

* Keppel is a member of the American Institute of Certified Public Accountants and the Buffalo chapter of the New York State Society of Certified Public Accountants.

Real Estate Cost Segregation: A Practitioners Guide by Grant Keppel, CPA is published by Thomson | RIA.