Death, Design and Taxes

Understanding Cost Segregation and How It Can Affect Project Design & Construction

After moving into our new offices last year, TPDE participated in a Cost Segregation Study with C.B. Richard Ellis. The purpose of the study was to analyze the capital expenditures for our office build out project and to segregate them into appropriate accounts for classification under the provision of the Modified Accelerated Cost Recovery Systems of the Tax Reform Act of 1986.

The Study afforded us the opportunity to understand the provisions of the Tax Reform Act and how this affects the details of project design and construction.

Under the provision of the Modified Accelerated Cost Recovery Systems of the Tax Reform Act of 1986, the identification of specific building components can be treated as Personal Property and Site Improvements – both with an accelerated tax depreciation of five, seven, and 15 years vs. Real Property with tax lives of 27.5, 39 or 15 years. Understanding the differences can provide designers and clients with information that may provide the opportunity of producing designs, details and solutions that may assist them in optimizing accelerated depreciation.

Any building that has been built or acquired, including tenant improvements, since 1987 is eligible for a Cost Segregation Analysis. When working with a Cost Segregation consultant, these components are identified, classified and correctly valued. By doing so, clients may be able to recover more of their costs in the first year.

A cost segregation analysis should be initiated early in the program development phase of the design process. TPDE is presenting project build out design options that can be advantageous. These components effect many aspects of project design, engineering and construction and may include the details/design of load bearing elements, various methods of architectural fastening, wall construction details, flooring and ceiling specifications and details, weight transfer details, heating and cooling systems, carpentry, electrical, lighting, plumbing, millwork and decorative elements.

*Architectural services are provided by and under the direct supervision of Robert Mark Parnes Architecture LLC, a licensed architect.