What is “Mixed-Use” Property?
Mixed-used property or development is a type of real estate improvement that combines residential, commercial, retail, parking, or other functions into a common building or series of buildings in an area. Vertical mixed-use development combines different uses within the same building and horizontal mixed-use development combines single-function buildings across a common area. More commonly found in urban settings this type of development is gaining in popularity and attracts a variety of residents, workforces and general consumers to the property.
What is Capital Gains Tax?
A capital gains tax is a tax on gain or profits realized on the sale of a non-inventory asset that is sold at a price greater than its purchase price. Capital gains are commonly realized after the sale of stocks, bonds, precious metals and property (real estate). Capital gains are typically taxed at ordinary income tax rates (different rates apply to long-term capital gains and qualified dividends).
Who is a Certified Cost Segregation Professional?
The Certified Cost Segregation Professional (CCSP) designation is the highest credential in the cost segregation industry issued by the American Society of Cost Segregation Professionals (ASCSP). Specialist with this designation have met ASCSP’s strict level of standards for required work experience and have passed the ASCSP certified member examination.
How are Condo Tax Basis Allocation and Cost Segregation Studies associated?
CCSP specialists typically employ engineering and quantitative analysis techniques when conducting cost segregation studies. These techniques require an understanding of construction, architecture, engineering relative to cost accounting and valuation. Similar techniques can be employed to divide or appropriate development costs of mixed-use properties based on their functions.
Does one study supersede the other?
Condo Tax Basis Allocation Studies and Cost Segregation Studies are distinct and different in their purposes. Basis allocation is purely designed to appropriately allocate the costs of developing a property into separate functional areas based on the property’s use. Cost segregation categorizes costs into their appropriate MACRS tax classifications for federal tax depreciation and reporting purposes. It is typical to complete a Condo Tax Basis Allocation Study before a Cost Segregation Study. After basis has been appropriately defined for each section of the property, certain sections may or may not benefit from further segregation analysis for depreciation or taxable gain purposes.