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FAQ'S |
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FREQUENTLY ASKED QUESTIONS
• How is Cost Segregation affected by Alternative Minimum Tax (AMT)?
• Why is it that my CPA cannot conduct the Cost Segregation study?
• Why should I have a Cost Segregation study done now when I can just wait until my taxes are due next year?
• What about asset retirement?
• What is the engineering approach to Cost Segregation?
• Will a Cost Segregation study increase my chances of being audited?
• Why has my accountant not already performed a Cost Segregation study?
• Why has my accountant not already recommended a Cost Segregation study?
• I acquired my commercial property through a 1031 Exchange. Do I still qualify for a Cost Segregation study?
• Why do I need AEON when I am already doing Cost Segregation?
• I expect that I may sell my commercial property in the near future. Will a Cost Segregation study still be beneficial?
• Our commercial properties are owned as a REIT. Can we benefit from a Cost Segregation study?
• How long does it take to do an engineered Cost Segregation study?
• How much does an engineered Cost Segregation study cost?
• Does AEON offer no-cost estimates of its engineered Cost Segregation studies and its fees?
• What experience does AEON have in Cost Segregation?
• My contractor says 60% of the electrical contract was for my manufacturing equipment. Why do I need an engineered cost segregation study?
• This seems too good to be true! I thought Investment Tax Credit (ITC) was discontinued.
• Why should I pick AEON Capital Consultants to do my Cost Segregation study?
• What types of commercial properties are eligible for an engineered Cost Segregation study?
• We have commercial property in South Carolina. Does AEON offer its services in other U.S. states?
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How is Cost Segregation affected by Alternative Minimum Tax (AMT)?
Cost Segregation works with AMT will a small adjustment. Personal Property identified by the Cost Segregation study, for improvements placed in service after 1998, will be calculated using a 150% Declining Balance method rather than 200%. This slower rate of depreciation will not significantly impact the benefits. Improvements placed in service before 1998 require a more complex analysis that needs to be done on a case by case basis.
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Why is it that my CPA cannot conduct the Cost Segregation study?
Cost Segregation studies conducted by non-qualified individuals, including CPA’s introduces risk. The IRS clarified its position on this issue when it published the “Cost Segregation Audit Techniques Guide ” in 2004. This Cost Segregation guide includes specific language regarding the qualifications of the individual performing the Cost Segregation study:
“….the preparation of Cost Segregation requires knowledge of both the construction process and the law regarding property classifications for depreciation purposes…”
“… a quality study always identifies the preparer and always references his/her
credentials, experience and expertise in the Cost Segregation area…”
“… experience in cost estimating and allocation, as well as knowledge of the applicable law, are other important criteria…”
With all variables accounted for, engineered Cost Segregation can be highly complex. Property, used in different ways, will be treated differently. An electrical outlet in one room may qualify, but the same configuration of receptacle in another room may not qualify due to application. AEON’s Cost Segregation engineers and specialists have thousands of hours of experience in this analysis process and know exactly how to make these classifications
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Why should I have a Cost Segregation study done now when I can just wait until my taxes are due next year?
If we perform an engineered Cost Segregation study now, your CPA can immediately lower your quarterly tax payments.
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What about asset retirement?
The only way to correctly retire assets that are replaced, such as roofs and HVAC units, is with the documentation provided by an engineered Cost Segregation study. All AEON Cost Segregation reports provide the data needed for this process. This feature, alone, can make a Cost Segregation study worthwhile.
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What is the engineering approach to Cost Segregation?
The engineering approach to Cost Segregation is a systematic component by component analysis and identification of the actual system in place without regard to Section 1245 vs. 1250 property. Each item is priced according to an industry standard reference then the entire contract is adjusted to the actual cost. This gives each individual item a true cost. This methodology to Cost Segregation has already proved supportable for us under several IRS Revenue Agent Reviews (RAR). (see our IRS section).
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Will a Cost Segregation study increase my chances of being audited?
Absolutely not. The IRS has actually defined and required Cost Segregation to take the proper depreciation.
(see our IRS section).
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Why has my accountant not already performed a Cost Segregation study?
The skill-set required for a Cost Segregation study is completely different from accounting. As outlined by the IRS in its Cost Segregation Audit Techniques Guide, “….the preparation of Cost Segregation requires knowledge of both the construction process and the law regarding property classifications for depreciation purposes…”.
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Why has my accountant not already recommended a Cost Segregation study?
While Cost Segregation has been around for many years, it was finally defined in detail, as well as endorsed, in 2004, with the publishing of the Cost Segregation Audit Techniques Guide; therefore, it is relatively new. Further, Cost Segregation studies entail primarily engineering and construction disciplines, rather than accounting.
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I acquired my commercial property through a 1031 Exchange. Do I still qualify for a Cost Segregation study?
Absolutely. A high percentage of our Cost Segregation studies involve 1031 exchanges. The primary consideration will be the actual tax basis of the commercial property.
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Why do I need AEON when I am already doing Cost Segregation?
Most all Cost Segregation studies in existence are not engineered and can introduce risk with the IRS. (See our IRS section). Further, we often are able to identify even higher levels of benefits.
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I expect that I may sell my commercial property in the near future. Will a Cost Segregation study still be beneficial?
Yes. In the case of an outright sale or taxable transaction, there will be some recapture of depreciation; however, the majority of taxes will be at capital gains rates and you deductions at ordinary rates. If you participate in a 1031 Exchange, there will be no recapture issue and you will continue to defer taxes. Another consideration is that an engineered Cost Segregation study may make the sale of the commercial property easier, since you can demonstrate potential tax savings for the buyer. It is possible, for a nominal fee, for AEON to restate the Cost Segregation study to the new owners basis, so that he can utilize the benefits.
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Our commercial properties are owned as a REIT. Can we benefit from a Cost Segregation study?
Yes. Additional restrictions do apply, but similar benefits from increased cash flow are realized. Also, a Cost Segregation study may offer some dividend flexibility and the ability to pay dividends in the form of return on capital rather than income.
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How long does a Cost Segregation study take?
Our preliminary Cost Segregation proposal will take 3 business days. Upon acceptance of our proposal, our Cost Segregation study will take five to seven weeks, depending on the scope and complexity of the project.
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How much does an engineered Cost Segregation study cost?
Our Cost Segregation studies are performed for a fixed fee so you will always know the cost in advance. Each study is unique and is priced on a project basis. This will be included in our Preliminary Proposal.
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Does AEON offer no-cost estimates of its engineered Cost Segregation studies and its fees?
Yes. All we need is just a little information about your commercial property such as the base cost, dimensions, material used, type of building, etc., and a few digital pictures. With just basic information, AEON specialists compare your commercial property to similar properties in its database of thousands of similar Cost Segregation studies. This allows us to predict a range of benefits to be captured through a formal study. Our proposals are always conservative and include our fixed fee to perform the study. Just contact us, and you will soon see the tax benefit that you can achieve through our engineered Cost Segregation estimate.
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What experience does AEON have in Cost Segregation?
Over the past 10 years our Cost Segregation engineers have provided studies on projects as small as an office suite remodel to as large as a high tech manufacturing plant valued at over a billion dollars. Engineered Cost Segregation studies have been performed for some of the largest accounting firms in the country, as well as directly for property developers and individual clients.
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My contractor says 60% of the electrical contract was for my manufacturing equipment. Why do I need an engineered Cost Segregation study?
Estimating costs, whether by your contractor or by your accountant, is not acceptable unless they are part of an engineered Cost Segregation study. You could be closing the door on significant tax benefits, while opening the door for difficulties in an audit. (IRS Legal Memorandum 1991045) (See our IRS section).
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This seems too good to be true! I thought Investment Tax Credit (ITC) was discontinued.
Modified Accelerated Cost Recovery System (MACRS) has its roots in ITC. That program was changed to Accelerated Cost Recovery System (ACRS), then modified (CPA, certified public accountant, accountants, accounting, MACRS). The IRS rulings and court cases support the idea that systems which directly serve equipment that qualifies for accelerated depreciation also qualifies for accelerated treatment. The only catch is you must have the proper documentation using the “engineering approach” to justify what you claim.(See our IRS section).
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Why should I pick AEON Capital Consultants to do my Cost Segregation study?
We are dedicated to a single objective: Providing you with the most accurate, detailed and thoroughly documented engineered Cost Segregation study in the business.
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What types of commercial properties are eligible for an engineered Cost Segregation study?
As long as the commercial property value is greater than $1,000,000 (excluding land) or the leasehold improvements are greater than $500,000, then the commercial property could be eligible for an engineered Cost Segregation study. Please contact us for a no-cost, no obligation estimate. Below are just a few of the types of commercial properties that our engineers have performed Cost Segregation studies:
Residential Properties Eligible for Cost Segregation:
Apartment, nursing home, senior assisted living facility, retirement community, etc.
Resort and Recreation Properties Eligible for Cost Segregation:
Hotel, motel, Inn, lodges, casino, retreat camp, resort condo (condominium), vacation apartment, convention center, pro-profit museum, etc.
Dining and Entertainment Properties Eligible for Cost Segregation:
Restaurant, bar, grill, diner, bistro, bakery cafe, donut shop, food court, country club, lodge, winery, brewery, ice cream parlor, fast food chain, night club, arcade, movie theater, cinema complex, opera & music hall, etc.
Sports and Outdoor Recreational Properties Eligible for Cost Segregation:
Theme park, amusement park, water park, ballpark, stadium, arena, karate studio, yoga studio, pilates studio, judo center, martial arts studio, tai chi studio, dance studio, ballet studio, health spa, fitness center, gym, physical fitness center, racket club, golf course, miniature golf course, race track, yacht harbor, bowling alley, private zoo, animal park, etc.
Retail, Wholesale, and Services Properties Eligible for Cost Segregation:
Strip mall, shopping mall, shopping complex, discount store, warehouse retail, box retail, bank, laundry mat, retail outlet, self-storage unit, car dealership, auto dealership, truck dealership, boat dealership, gas station, service station, auto repair shop, body shop, garage, car wash, truck stop, convenience store, self-storage unit, drug store, supermarket, wholesale outlet, hardware store, shop, etc.
Business Offices eligible for Cost Segregation:
Office rental, office building, office complex, development complex, research park, industrial park, offices, data center, research center, telecom data hub, recording studio, television network, radio station, broadcast station, movie studio, etc.
Industrial / manufacturing Eligible for Cost Segregation:
Factory, manufacturing plant, warehouse, printing facility, shipping depot, power plant, refinery, lumber yard, building supply dealer, high tech hardware manufacturer, semiconductor fabrication plant (chip fab), software company, telecom industry, aerospace industry, defense industry, steel mill, textile mill, textile factory, equipment manufacturer, OEM, furniture factory, cold storage facility, mineral product manufacturing, etc.
Medical Facilities Eligible for Cost Segregation:
Hospital, medical office, medical complex, clinic, dentist office, chiropractic office, assisted living center, emergency ward, medical plaza, veterinary clinic, etc.
Agriculture and Food Processing Properties Eligible for Cost Segregation:
Farm, diary farm, nursery, food processing plant, bottling plant, cannery, winery, brewery, supermarket, chocolate factory, etc.
Educational and Human Services Eligible for Cost Segregation:
Private school, private university, pre-school, nursery school, senior center, beautician, beauty parlor, saloon, funeral parlor, mortuary, etc.
Tourism and Infrastructure Projects Eligible for Cost Segregation:
Hotel, motel, Inn, airport, airplane hangar, harbor, convention center, station, etc.
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We have commercial property in South Carolina. Does AEON offer its services in other U.S. states?
Yes. AEON Capital Consultants offers engineered Cost Segregations services and no-cost estimates anywhere in the United States.
Contact us for a no-cost, no obligation Cost Segregation estimate applied to your commercial property.
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