One of the most commonly recognized uses for cost segregation is with new acquisitions. In fact, many property owners and investors have made cost segregation a routine part of their overall buying strategy.

Ideally, a cost segregation study should be conducted for the year a property is placed in service; in order to maximize depreciation deductions from the start. Therefore, newly acquired properties are great candidates for this valuable tax planning strategy. Properties that were acquired in previous years can be addressed with a look-back study.

In addition to the cash flow benefits associated with accelerated depreciation, a cost segregation study can help clarify ownership issues with regard to tenant improvements. This can be a messy situation, from a tax perspective, with an acquired property. However, it is important to know what the new landlord owns and what the existing tenants own; more importantly it is important to determine what the new owner should be depreciating. A cost segregation study is the most effective way to achieve this.


Benefits

• Maximize depreciation deductions from day one
 
• Identify which assets should be on the new owners depreciation schedule and which assets belong to existing tenants
 
• There may be an opportunity to minimize real estate transfer tax


Timing

• Best if CSS is performed immediately after aquisition
 
• Properties acquired in the past are eligible for a look-back study