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| Look Back Studies |
Cost Segregation studies can be performed even if the property has been in service for several years. The IRS tax law allows for the taxpayer to perform a cost segregation study or “look-back” study to determine what depreciation was not utilized when the property was originally placed in service.
The difference between what was depreciated and what should have been is allowed as a one-time catch-up adjustment on the taxpayer’s current federal income tax return. This process is an automatic change and does not require amending the prior tax returns.
The result is a significant increase in cash flow in the current tax year.
The IRS has issued guidance that allows for automatic consent to be given to taxpayers to change their method of accounting where they have claimed less depreciation than allowable. This process is an automatic change and does not require amending prior tax returns.
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