Financial Institutions
Cost Segregation
A cost segregation study from Moss Adams may help you save money—and improve your cash flow—by accelerating qualifying depreciation deductions and allowing you to begin deferring income taxes. We have specific experience with financial institutions.
You will receive a written report that includes construction cost spreadsheets, which segregate the assets into personal property (5- or 7-year tax life), land improvement property (15-year tax life), and real property (39-year tax life). This report also references court cases, revenue rulings and tax citations, and includes documentation that supports our positions regarding identification of personal property and land improvement assets for purposes of federal income tax reporting.
Case Histories
- A cost segregation study for a newly constructed, stand-alone bank branch facility in Washington resulted in over 40% of the $1,500,000 cost being reclassified to shorter lived property. This saved the bank $29,000 in federal taxes (35% tax rate) in the first year alone and $137,000 in the first five years; all as a result of the increased depreciation.
- A cost segregation study involving 11 purchased and remodeled facilities placed in service over a ten year period provided significant tax savings. This study, which also involved an automatic accounting method change to capture the past missed depreciation in a one-year catch-up, reclassified 32% of the original $7.6 million of cost basis to shorter lived assets. This resulted in increased depreciation in the first two years of approximately $1,100,000, creating $432,000 of deferred tax. The net present value of the depreciation increased and corresponding tax deferrals were just over $400,000 (assumptions: 40% federal and state tax rate, 7% discount rate).
