Maria Arriola Has Good News for Commercial Real Estate Owners

Good News Commercial Real Estate Owners

Cost segregation is an Internal Revenue Service recognized application for commercial real estate owners. A cost-segregation study accelerates the depreciation of a building’s components into shorter depreciation categories such as five- seven- and 15-year rather than the conventional 27.5 and 39 year categories. Five and seven year categories may include items such as decorative building elements, electrical for dedicated machinery and computer equipment, and carpet. The 15 year category may include items such as site utilities, landscaping, and paving. For commercial real estate to qualify for this application, it must have been built, purchased, or renovated after 1986.

Here’s the good news! The Workers Homeownership and Business Assistance Act of 2009 allows a one-time three, four, or five year net operating loss (NOL) carryback which can be generated by losses from either the 2008 or 2009 tax year. Since cost segregation generates substantial increases in depreciation expenses, even a qualified business with taxable income may have an NOL after the application of a cost segregation study. This means that it can be used against current taxable income, carried forward up to 20 years, or can be carried back three, four, or five years. Payment is a refund check on taxes paid in prior years. With this temporary and generous NOL carryback flexibility, there has never been a better time to apply a cost segregation study to your assets.

Call your ELLS advisor for further details!