Cost Segregation Without an On-Site Analyst
The primary reason to remove an on-site inspection is to reduce the fee associated with having an analyst come to your property. While these savings can be substantial, there are many risks as well. The biggest danger is overstating the amount of depreciation, as this can bring down the wrath of the IRS. Undervaluation may not bring legal problems, but it will undercut your cost segregation to an extent, possibly erasing any savings that avoiding the on-site visit would bring. To counter this, O’Connor’s approach to DIY cost segregation aims to give you both reduced costs and accurate results on your study. In some scenarios, we will provide a site visit for free if we believe it will achieve a credible result.
When we are assisting your DIY cost segregation effort, it is imperative that our appraiser is given plenty of hard evidence, like documents, video, and tax roll data. Evidence always trumps a mathematical model, something often deployed by other firms. This is because of the many weaknesses found in mathematical models:
We at O’Connor will use statistical modeling for certain aspects, but these are always carefully chosen cases. Usually, it is for a client that has many properties with a similar layout. For instance, if a client has a dozen fast-food restaurants with the same layout, there is no need to visit all of them. This is the only situation in which we will use modeling, as any other factor is inadequate to the requirements of the IRS.
O’Connor’s Collaborative Method
When it comes to DIY, O’Connor is an active partner in your cost segregation journey. We will work tirelessly with you to generate accurate reports. We will primarily focus on a few factors in this team-based study:
What Not to Do
As stated above, some property tax experts cut corners via mathematical models. While this may seem simple, it leaves a lot of information out. This creates gaps in which mistakes can be made and depreciation can be lost. Such models only take in the most basic information, such as the age and size of a building. There can be 100 or more short-life depreciation components in most commercial properties.
Some mathematical model weaknesses are:
The IRS will not care about depreciation being underreported, as it will help keep your tax bill high. However, overstating depreciation can cause some serious problems.
This is why we at O’Connor take care when reviewing your cost segregation reports:
The O’Connor Guarantee:
