The Process of Performing a Cost Segregation Analysis
From initial consultation to working with your CPA to take full advantage of cost segregation findings, our goal is to provide you with friendly, professional service that allows you the maximum tax advantage, while being careful not to be more aggressive than the IRS allows.
Here's the process we follow in developing a cost segregation analysis:
- Initial Consultation — We offer a free initial consultation that will help determine if a cost segregation analysis will be beneficial for your property. This consultation includes a projection of the benefits based on your specific property. We also look at the tax effects from a cost segregation analysis in regards to potential passive activity & net operating losses, potential real estate sales & 1031 exchanges, and potential sales of partnership interestes or shareholder shares.
- Engagement Letter — When you sign the Engagement Letter contracting for our services, Franklin Tax Group will provide you with a request for documentation necessary for preparing the analysis.
- Blueprint Analysis — If available, we conduct an analysis on the "as completed" blueprints of your property.
- Site Visit — We conduct a site visit to your property to obtain a better understanding of its layout and design, adding to what we have already gathered from our analysis of the blueprints.
- Qualified Property Documentation — All qualified property eligible for accelerated depreciation is documented through photographs, which are included in the final cost segregation analysis.
- Identification of Cost Detail - We either us an "actual cost" or "engineered cost" approach to identify cost detail related to the components of the real estate. The "actual cost" approach uses detail gathered from construction documents and in some case a general contractor questionnaire. The "engineered cost" approach is a cost estimating approach accepted by the IRS where estimates of cost components are prepared by Franklin Tax Group engineers. The three to four hundred line items of cost detail provides the most specific detail of the two approaches and most often the greatest tax benefit.
- Property Classification — A Franklin Tax Group CPA categorizes the component cost detail into the proper property classes for tax purposes.
- Cost Segregation Analysis — We prepare two copies of the formal written report for your records. Additional reports are available upon request.
- CPA Instructions — Supplementary instructions are provided to assist your CPA in incorporating the cost segregation analysis into the current year's tax return.
- Follow-up Consultations — If needed, we provide follow-up phone consultations if additional assistance is needed by you or your CPA in understanding and applying the analysis.
