MCRES Expands Its Education Programs Highlighting Tax Benefits of Cost Segregation & 1031 Exchanges MCRES has developed a continuing education series of complimentary CPE- and CLE-eligible cost segregation and 1031 exchange presentations.
Real-Estate-News.net - Jul 23,2010 - LAKEWOOD, N.J. – Madison Commercial Real Estate Services (MCRES) of Lakewood, N.J., has developed a comprehensive continuing education series of complimentary CPE-eligible cost segregation and 1031 exchange presentations to help CPAs, property owners and managers, builders and end-users understand and implement these residential and commercial real estate strategies.
Cost Segregation Increases Cash Flow
An Internal Revenue Service (IRS)-approved process, cost segregation reclassifies real estate components and improvements to effectively accelerate depreciation deductions, defer taxes and improve cash flow.
“Despite being an invaluable tool in any economic cycle, cost segregation remains underutilized due to its relative anonymity and complexity,” said Eli S. Loebenberg, chief executive officer of MCRES affiliate Madison SPECS, LLC, who serves as the program’s lead instructor and moderator. “Because this service has such important potential, MCRES has developed a curriculum that helps businesses and industry professionals identify when a cost segregation study will yield value, gain an understanding of the process and enhance their overall knowledge of this relevant accounting practice.”
According to the IRS code, buildings can be depreciated over a 27.5- or 39-year period. However, certain categories of fixed assets, whether it be an existing property or new construction, can be depreciated over five-, seven- or 15-year periods, resulting in significant tax credits. Property types include, but are not limited to, office, industrial, retail, multi-family and senior housing. Some areas identified and considered part of a cost segregation study are non-structural equipment, playgrounds, tennis courts, parking lots, landscaping, signage, interior and exterior lighting and carpeting.
Case In Point
One example of MCRES’ results-driven studies is completion of an engineering and tax assessment within a three-week timeframe of one of the largest mixed-use corporate office parks in the nation. Employing and dispatching an in-house team of accountants and engineers, MCRES identified the assets throughout the 500-acre park that were eligible for accelerated tax depreciation and then accurately determined their overall value. The 14-buildings, totaling approximately 4 million square feet, included office, industrial, research, distribution and manufacturing space.
The result: reclassification of 13 percent of the facility’s total cost from a 39-year to a 5-year Modified Accelerated Cost Recovery System (MACRS); 6 percent was reclassified to a 15-year MACRS property; and a net tax benefit of $201,260 in the first year was achieved, followed by a net tax benefit over the first six years that exceeded $2.26 million.
“Regardless of the vast amount of information and tight schedule of this project, it was a seamless process,” explained Loebenberg. “We were able to service this client with the same speed, accuracy and thoroughness that we do every client, regardless of the property’s use or size. For each $1 million of reclassified assets, MCRES averages approximately $150,000 to 200,000 of tax savings.”
1031 Allows RE Investors to Defer Capital Gains Taxes
Also an IRS-approved process, the 1031 exchange allows commercial real estate investors to defer capital gains taxes by exchanging one property for another like-kind property. Safe-harbor rules bar property owners from immediately accessing funds generated by the sale of
