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A Turnkey Solution

With thousands of Cost Segregation Studies completed for clients nationwide, you can have confidence that a Scarpello Consulting Cost Segregation Study will utilize a proven, turnkey process that is efficient – with minimal disruption to you.  Regardless of the situation, from manufacturing plants to retail properties, your Scarpello Team can quickly ascertain what’s needed to get the Cost Segregation Study completed.  

Our Process Works Like This

  1. Review tax depreciation schedules to identify areas of potential reclassification with an emphasis on assets placed into service after 1987 and with a tax life of 27.5 to 39 years.
  2. Review invoices, construction cost details, blueprints and tour your facility in order to determine the proper tax classification.
  3. Provide you with our factual determination about your property’s tax life and recalculate depreciation and the applicable 481(a) adjustment.
  4. Prepare and draft Form 3115 (IRS form for Application for Change in Accounting Method) when applicable.
  5. Review the documentation and calculations with you.
  6. Provide a detailed report and explain recommendations for any future property acquisitions or modifications with you.

The report you’ll receive comply with the IRS standards stipulated in the Audit Techniques Guide for Cost Segregation Studies. It is critical to work with a firm that can not only distinguish between tangible personal property and a building’s structural components, but also has an understanding of the IRS Revenue Procedures and supporting case law. And, rest assured, Scarpello Consulting has a proven track record with the IRS.

Property Reclassification

Increase cash flow by accelerating depreciation expense and deferring federal and state income taxes.

Here is how it works: generally an entire building would be classified with a straight- line depreciation cycle of either 39 years for a commercial and industrial property or 27.5 years for residential-rental property.

By applying a cost segregation study from Scarpello Consulting, you can maximize the inherent tax benefits by identifying, classifying, and segregating the personal property components of the building. This results in accelerated depreciable lives of 5, 7 and 15 years, thus saving thousands of tax dollars.

New Purchase

The following graph illustrates the future tax benefits of assets placed into service in the current year. $2,000,000 reclassed to a seven year life.

  • Year 1
    25
  • 50
  • 75
  • 100
  • Year 5
    50
  • 50
  • 50
  • 50
  • 50
  • Year 10
    50
  • 50
  • 50
  • 50
  • 50
  • Year 15
    50
  • 50
  • 50
  • 50
  • 50
  • Year 20
    50
  • 50
  • 50
  • 50
  • 50
  • Year 25
    50
  • 50
  • 50
  • 50
  • 50
  • Year 30
    50
  • 50
  • 50
  • 50
  • 50
  • Year 35
    50
  • 50
  • 50
  • 50
  • 50
  • Year 40
    50
    • $0
    • $50,000
    • $100,000
    • $150,000
    • $200,000
*ATNPV $374,956.47
  • 1st Year Tax Savings
  • 2nd Year Tax Savings
  • 3rd Year Tax Savings
  • 4th Year Tax Savings
  • 5th Year Tax Savings
  • $103,192.00
  • $175,408.00
  • $119,408.00
  • $79,408.00
  • $50,928.00
*After Tax Net Present Value 6% Discount Factor Assuming a 40% Effective Tax Rate

PURCHASED IN PRIOR YEARS

The following graph illustrates assets placed into service 7 years ago. $2,000,000 reclassed from 39-year life to a 7-year life.

  • Year 1
    25
  • 50
  • 75
  • 100
  • Year 5
    50
  • 50
  • 50
  • 50
  • 50
  • Year 10
    50
  • 50
  • 50
  • 50
  • 50
  • Year 15
    50
  • 50
  • 50
  • 50
  • 50
  • Year 20
    50
  • 50
  • 50
  • 50
  • 50
  • Year 25
    50
  • 50
  • 50
  • 50
  • 50
  • Year 30
    50
  • 50
  • 50
  • 50
  • 50
  • Year 35
    50
  • 50
  • 50
  • 50
  • 50
  • Year 40
    50
    • $0
    • $100,000
    • $200,000
    • $300,000
    • $400,000
    • $500,000
    • $600,000
    • $700,000
    • $800,000
*ATNPV $358,115.51
  • 1st Year Tax Savings
  • $645,288.00
*After Tax Net Present Value 6% Discount Factor Assuming a 40% Effective Tax Rate

The Tax Court Decisions and The IRS

As a business owner, you know the tax laws are always in flux. This also pertains to Cost Segregation studies. The Scarpello Team includes an in-house lawyer. It is his responsibility to constantly stay abreast of current tax laws and how they could effect Cost Segregation Studies. His findings are published monthly and available to the public.

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