The following are the primary criteria in determining whether or not this strategy applies:
* Must be commercial real estate,
* Must have been built, purchased or renovated since 1987,
* Generally speaking the cost basis should be $300,000 or greater,
* The owner should intend to own the property for 5 years or more, and
* The owner must be paying income taxes.
As you should expect, there are a number of important benefits that accrue to the owner. You will:
•
Have properly classified assets,
Have properly classified assets,•Enjoy accelerated depreciation,
Enjoy accelerated depreciation,•Have a significantly increased depreciation expense,
Have a significantly increased depreciation expense,•Have minimized income tax liability,
Have minimized income tax liability,•Have increased cash flow,
Have increased cash flow,•Be able to write-off of assets earlier, and
Be able to write-off of assets earlier, and •Be able to take advantage of “Catch Up” depreciation.
Be able to take advantage of “Catch Up” depreciation.“Catch Up” depreciation is allowed to take advantage of accelerated depreciation in the current tax year even though the property was built, bought or renovated in a prior year. The owner realizes the cumulative tax benefit, from the actual date of ownership, in the current tax period.
One other important feature is "Carry back – Carry forward". Should the depreciation expense result in a net operating loss for the filing year, the loss amount may be applied to up to the prior two year’s tax liability and/or it may be carried forward until it is used up.
What Is Involved?
