What does the IRS have to say? Learn about IRS regulations on equipment appraisals for estates, tax purposes and donations, and browse news and information about Cost Segregation Studies & the IRS.
Cost segregation studies are in the news recently due to the Peco Foods, Inc. v. the IRS court case, wherein the tax court upheld the IRS’ denial of Peco Foods’ reclassification of assets identified by a cost segregation study.
Late last year, another cost segregation study ran into trouble with the IRS in the case of Ronald Pearce and Daryl Pearce, Plaintiffs, v. Department of Revenue, State of Oregon, Defendant. Since one of the big advantages of a cost segregation study is the supposed approval by the IRS, some folks may be wondering if a cost segregation study is still an appropriate way to reduce tax liability and create additional cash flow.
This is the second half of an article on the consequences of the Internal Revenue Service’s new and significant enforcement initiatives that specifically target abusive tax-related appraisals and the individuals who prepare them. The first half was published in a previous post; the article is authored by Jay Fishman, FASA, Business Valuation Review Editor and Chairman of the American Society of Appraisers Government Relations Committee; Bruce Bingham, ASA, former Chairman of the Business Valuation Committee; and Peter Barash, Government Relations Consultant to the Business Valuation Committee.
Internal Revenue Code Section 6701
I thought I’d pass along some information about the IRS’ strategy for Estate Tax Returns and their related appraisal. The moral of the story is to hire a qualified appraiser and save a lot of trouble. Because this article is so long, I’ve broken it into 2 separate posts. The second half will post next week.
By Jay Fishman, FASA, Bruce Bingham, ASA, and Peter Barash
Tax Season Cost Segregation Studies: Several CPA firms in the Sacramento area have contracted with me this year to do Cost Segregation Studies not only for their own real estate, but also to provided these tax-saving studies for their clients. So far this tax season I’ve looked at law offices, food processing facilities, optometrist offices, CPA complexes, optics labs, agricultural properties, and a variety of rental office complexes—all of these business owners will benefit from tax savings when they submit their cost segregations studies to the IRS.
I’m proud & pleased to present a guest article with this reprint of the President’s Message from the Sept 2010 newsletter of the American Society of Appraisers NorCal Chapter. Thanks, Bob, for allowing us to share your message on our blog!
At a recent Northern California ASA meeting, I sat next to a retired IRS appraisal reviewer who answered the on-going question of qualified appraisers rather succinctly.
Off the record, he said, the IRS has such respect for the American Society of Appraisers designation that very few ASA-submitted appraisals are required to be passed up the chain for higher review.
Agricultural Cost Segregation Studies are the up & coming smart tax move here in the Sacramento Valley, agricultural center of California. And it’s about time: Although cost segregation studies have been available for decades, they’ve only recently hit the mainstream. Agriculture business folks in Northern California are realizing what a great benefit these studies can be to their bottom line.
The general concept of Cost Segregation Studies, in which personal property—such as removable flooring, plumbing and electrical components connected to personal property—are segregated from the real property of foundations, walls and other structural components, works well for properties such as office complexes, apartment buildings, single-family rental units, manufacturing plants or shopping malls.
While owners of income-producing property are the folks who benefit financially from Cost Segregation Studies, their CPAs and Tax Preparers can benefit as well. When a CPA/Tax Preparer recommends a Cost Segregation Study to a client who reaps a substantial tax refund, the CPAs/Tax Preparer looks like a Superhero!
I’ve talked to my own tax preparer about this; he invited me to speak to his staff about Cost Segregation Studies. Spent some time working up a concise slide presentation to add some visual interest to the presentation and realized that the points are very simple:
Cost Segregation Studies could save Sacramento and Northern California business owners thousands–even hundreds of thousands–of dollars in taxes if they own their facilities. Most of these business owners, however, don’t seem to know about Cost Segregation Studies. Why do I say that? Because every time I mention the advantages of a Cost Segregation Study to an owner of income-producing facilities, whether in Sacramento, Stockton, San Francisco or Yuba City, I get a puzzled look, the same look you might get if you asked for a “pop” in San Francisco. Or sometimes I get that other puzzled look, the one that means, “I think I’ve heard of that … but I’m not sure what it is … and I’m not sure it’s a good idea for my facility.”