Real Estate & Construction Accounting Blog

We have recently written blogs discussing the changes in the Repairs and Maintenance rules and regulations.  We have reviewed the changes to the basic rules reviewing what type of expenditures have to be capitalized and looked at the changes to the definition of a Unit of Property (UOP), as it relates specifically to real estate.  In this blog, we will expand the discussion on these changes to cover the General Asset Account (GAA) rules, related election, and the importance of understanding and...

Section 179D, the federal energy efficient tax deduction, has no doubt had a significant effect on the real estate and construction industries recently. In the 2012 edition of our survey of the Northeast Ohio real estate and construction industries (full results to be released soon), we asked, “Have you implemented any sustainable building practices over the last 12 months?” The two most common responses to the question were “HVAC” and “lighting,” with 78% of respondents choosing each. This is...

Over the past few years, there has been increased tax planning in the area of repairs and maintenance.  Taxpayers have been able to take advantage of favorable tax rules in this area, and accelerate the deductions for these types of expenditures.  Unfortunately for the real estate world, the capitalization rules (compared to what can be expensed) have changed starting in 2012 and, as one may suspect, these changes are not in the favor of the taxpayer. I will review the changes from the old rules...

If you own real estate, a cost segregation study is one of the best tools to help you reduce taxes and improve cash flow. Although a cost segregation study will not provide additional tax deductions, it will enable the taxpayer to accelerate a portion of the depreciation on the building. Cost segregation is the process of breaking out a portion of a building’s cost that can be depreciated quicker than the standard life of 39 years.

Where should a property owner start when considering a...

According to the code section 179D, the designer primarily responsible for designing the energy efficient aspects of government buildings (including new construction and rehabilitation) may be able to take the federal energy efficient commercial property tax deduction for doing so instead of the owner of the property. This deduction is passed to them from the government agency for which the building was designed as the government agency does not pay tax and therefore would not get the benefit...

This month's Special Delivery E-Newsletter includes the following articles:

• Key Provisions in the New Tax Act
• What Business Entity is Best for You?
• Tax Breakdown of Interest Expenses
• Summary of Key Tax Changes for 2011
• New Tax Relief Act Creates Dramatic Gifting Opportunities
• Many Smaller Employers Will Have to Use EFTPS for Payroll Tax Deposits
• Aurum Capital Markets Summary
• Understanding the Energy Efficient Deduction
• College Planning
• Audio Book Club

Key Provisions in the New Tax Act

The recent tax...

The recently enacted Healthcare Reform and 2010 Small Business Jobs Act includes an assortment of changes for small businesses. It also contains two significant changes for information reporting by taxpayers. As indicated below, this includes individuals who own rental property as a passive investment.

Who is affected by these changes?

Under the present law, information reporting (via form 1096 and 1099) is required to the IRS by all persons engaged in a trade or business who make...

Many executives are curious about cost segregation studies, but are unsure how they work, or even if their business would benefit from one.

Basically, a cost segregation study looks at specific components of your business’ facilities to find which components can be separated out and depreciated over shorter time periods therefore speeding up the related tax deductions. The true value of a cost segregation study is realized by looking at the time value of those tax deductions - being able to take...

Based on a recent ruling, taxpayers can now recover the cost of all newly-installed street light assets more quickly than if they were classified as land improvements.

The Tax Court recently ruled that street lights may be depreciated over seven years for federal tax depreciation purposes. This decision was based on the ruling that typical street light assets, which include poles, light fixtures, mounting hardware, and bases that can be relocated, and met the six criteria set forth in Whiteco...

According to the code section 179D, the designer primarily responsible for designing the energy efficient aspects of government buildings (including new construction and rehabilitation) may be able to take the federal energy efficient commercial property tax deduction for doing so instead of the owner of the property. This deduction is passed to them from the government agency for which the building was designed as the government agency does not pay tax and therefore would not get the benefit...

With the current state of the economy, real estate owners and developers are faced with many major issues as current tenants are going out of business and the pool of new tenants is shallow.  Although these issues are unfortunate, they also provide opportunities for tax savings. 

When a tenant leaves, a landlord is left with the question, “what can be done with the finished space that the tenant left behind?”  Since the introduction of the Modified Accelerated Cost Recovery System (MACRS), the...

With the crash of the real estate market some are looking to capitalize and purchase larger homes for a bargain price. In doing so, they face the problem of selling their current residence to make the move up. With the lack of buyer interest and with some people not willing to take such a large loss people are holding out for the market to rebound. This creates the problem of carrying two mortgages, which the monthly payments on two mortgages can create cash flow problems for many taxpayers in...

Grubb & Ellis recently sponsored an annual real estate forecast on the ever changing commercial real estate industry.  Unfortunately, at this time and for the foreseeable future it appears that the changes are not going to be for the better.  With the tightening of the credit markets now on a global level, funds have become increasingly harder to obtain for potential investors.   This real estate forecast agreed with many real estate professionals that we most likely have not hit rock bottom...