Cost Segregation Analysis

Our clients acquiring or constructing capital assets have benefited from working with Birch|REA, often experiencing reduced project costs, enhanced tax benefits, and more prudent accounting for and management of capital investments. Our professionals possess the requisite valuation, engineering, project management and tax planning experience to integrate technical knowledge and regulatory guidelines to add value in many areas, including cost segregation studies, component accounting, tangible asset valuation services, construction advisory services, and other specialized tax engineering studies. These services have been performed in conjunction with our financial/capital markets and sale-leaseback related services.

Birch|REA’s cost segregation services offer the opportunity to maximize tax depreciation benefits related to the construction or acquisition of real estate, while minimizing the risk of audit exposure. We will examine the property, identify qualified personal property costs, and classify those costs into the appropriate MACRS recovery period. The following are situations where a cost segregation study is typically implemented:

  • Construction of a new facility or acquisition of existing real estate
  • Renovations, improvements, or leasehold improvements made to an existing facility

Existing properties may also have the potential for tax depreciation benefits. Under various Revenue Procedures, taxpayers are allowed to reclassify the depreciable lives of certain building components and pick up previously unclaimed depreciation deductions. There are two primary instances where an opportunity for this type of analysis may exist:

  • A building was constructed and all construction costs were classified as 39- or 27.5-year property.
  • A company was acquired that included real estate and all building values were classified as 39- or 27.5-year property.

Birch|REA has the experience to conduct cost segregation studies for hotels, resorts, shopping centers, supermarkets, manufacturing facilities, golf courses, office buildings, warehouses, biotech & pharmaceutical facilities, and many other building types.