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Frequently Asked Questions

What is cost segregation?

Cost segregation is a specialized and powerful tool that more accurately allocates property components for federal income tax depreciation calculations. This includes 5, 7, 15, 27½ and 39-year items. Owners frequently increase depreciation by 50-75%, thus lowering taxable income.

Why is your report fee so much lower than the competition?

O’Connor has developed an extremely efficient business process to handle a large volume of cost segregation studies while maintaining, and often enhancing, the quality of results. We know exactly what needs to be measured and then integrated into a study in order to meet the IRS guidelines without “over-engineering” the staffing or production processes. Your ROI for the report can be significant!

What is my first year savings potential?

Due to the modest fee, clients typically achieve a 4:1 to 50:1 ratio of savings to cost, depending on the type of property and construction characteristics. First year tax savings achieved for an apartment complex were $200,000; a portfolio of office buildings saved $4.5 million; and a portfolio of eight retail centers and apartment buildings saved $1.4 million. This is based on our company experience that includes having prepared hundreds of cost segregation reports. As a result, multi-year pay-back ratios of 20:1 to 100:1 over 5 years are frequently reported among our clients.

How is a report prepared?

O’Connor works closely with you and/or your CPA or financial/tax manager to collect existing data and documents regarding the subject property. To prepare a report, an appraiser inspects the property to identify eligible items, then calculates their value and allocates each to its correct depreciation life, according to IRS rules and a series of court decisions.

Is cost segregation a red flag for an audit?

No, it accurately applies IRS rules and regulations, which are so complex most investors do not fully understand them. Using cost segregation is considered a conservative approach to more correctly reflect taxable income. In fact, our report provides back-up documentation on which tax return preparers can rely. No one ever knows what triggers an audit, but in the event that the IRS has questions about your O’Connor cost segregation study, we will interface with the IRS, defending our study and answering all their questions at NO ADDITIONAL COST TO YOU.

How much of my time is needed to get started?

You will need to provide us your cost basis information or a few details on new buildings or recent improvements and, in some cases, the depreciation schedule from your last tax return. Then we’ll spend 10 to 15 minutes to discuss this information with you by phone and schedule a site inspection.

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