FREQUENTLY ASKED QUESTIONS

FAQs

Q: What is a Cost Segregation Study?

A: A Cost Segregation Study is a strategic tax tool for accelerating the
return on capital from your property investment.

Cost Segregation Professionals such as Walker Bryce & Associates,
generate cash tax savings by carving out shorter-lived assets, qualifying
for five, seven or 15 year write-off periods that are normally embedded in
a building's construction or acquisition costs that are generally
depreciated over 39 years.

Q: Can I benefit from a Cost Segregation Study?

A: We believe you’ll benefit from a CSS if: you’ve purchased, constructed
or remodeled property after 1986; costs incurred exceed $500,000; you
anticipate holding the property for at least a few years; and, you are in a
high enough tax bracket to benefit from accelerated depreciation
deductions.

Industries that benefit most often from CSS include: manufacturing,
distributing and warehousing, automobile and truck dealerships,
nursing homes, health care facilities, office buildings, medical centers,
hotels, motels, apartments, and fast food restaurants.

Q: If Cost Segregation is a legal method to generate large cash tax
savings, why haven’t I heard of it?

A: The genesis of cost segregation started with the Big 4 accounting
firms, who only considered cost segregation studies on properties valued
at $20 million or more…and at very substantial fees.

Now, businesses can take advantage of over 75 prior IRS revenue rulings
and court cases to not only accelerate depreciation of certain assets but
also to recapture unclaimed depreciation deductions. This means that
smaller companies can take advantage of this tax strategy at very
affordable rates.

Q: What does a Cost Segregation Study cost?
A: Before conducting a Cost Segregation Study, Walker Bryce &
Associates performs a no cost feasibility study. If we determine your real
estate warrants cost segregation, the total fixed fee will generally fall
under 25 percent of the estimated Net Present Value (NPV) tax savings.
NPV is the calculation of the present value of tax savings achieved over
the 39-year depreciation period (life of the asset).

The total fixed fee can affect the real estate project. Additional factors,
such as location, accessibility, and quality of the records and documents
can also influence the ultimate cost.

Q: How long does a Cost Segregation Study take?
A: A Cost Segregation Study normally takes about six to eight weeks from
the time we receive all of the appropriate documentation.

Q: What Will Be Needed To Complete A Cost Segregation Study?
A: While each engagement differs depending on the project, generally we
need: a complete set of construction and site plans; current tax
depreciation records; building cost budget information; final AIA
application and a document of certification for payment or other cost
information; change orders, direct or indirect costs paid by the owner
that are not included in other documents; and other information deemed
appropriate.

Q: If I Don’t Have the Necessary Documents and Materials Can You Still
Perform A Cost Segregation Study?
A: Yes. We have construction, engineering, and other specialists that can
do an extensive site visit. They will measure and estimate using
currently accepted costing techniques and pricing guides to determine
the costs that qualify for shorter recovery life periods.

Q: Can Cost Segregation Apply To Projects Not Yet Constructed?
A: Yes. For projects not yet constructed, Walker Bryce & Associates can
design and implement a cost accounting system. This system saves time
and, by tracking segregated costs during the project’s construction,
produces the most thorough cost segregation study possible.

In addition, we stay abreast of issues concerning asset reclassification,
including the Internal Revenue Code and regulations. Our expert
analysis of these regulations and relevant case law, results in a concise
and defensible cost segregation report.

Q: Without Cost Segregation, Wouldn't We Get The Deduction In The
Future Anyway?
A: Yes. However, a Cost Segregation Study essentially gives you an
interest free loan from the government for the first 15 years, which you
will then repay interest free over the remaining 25 years. Wouldn't you
rather hold your money?

There are also advantages to doing a study if the building is going to be
sold or upon the death of a building owner. The present or future value of
the money you can save by having a Cost Segregation Study is usually
quite substantial. Have the cash now to reinvest it

Q: Will My Chance Of Being Audited Increase After A Cost Segregation
Study Is Completed On My Property?
A: The chance of being audited does not substantially increase after a
Cost Segregation Study. The Internal Revenue Service (IRS) accepts cost
segregation. IRS audits challenge certain classifications, not concepts.

For an accurate estimate, you can request a free analysis and proposal.
Generally, the savings is roughly 25 to 35 times the cost of the Study.

*A Study is generally beneficial if the property is not operating
  at a loss and is generally applicable unless the property is for a
  non-profit organization.