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Yes, Cost Segregation is extremely important due to the complexities of our tax laws.
Tax laws provide numerous asset lives and categories that may be applicable to various building projects. Taxpayers and accountants
often do not understand how to apply these tax rules. Normally, they depreciate the entire building cost over 39 years. At the time of
construction the general contractor provides you with a monthly draw request. In this draw request the contractor combines different construction costs into
single line item categories. These categories are made up of numerous components. For example the electrical contract might have light fixtures, panel boards,
and conduit buried within a single line item. When the building is completed your project-related construction costs are sent to your accountants so they can
prepare your depreciation schedules and tax returns. Because the contractor did not break out the different components of the building, your accountant is
hard-pressed to identify the various components of the building. Therefore, the entire project-related construction costs are placed in a 39-year
(non-residential real property) tax life. A Cost Segregation study can identify, segregate, and reclassify these components into a shorter depreciable tax life.
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