| Apartment owners can face staggering
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| | categorized as five-year items, meaning
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| expenses to maintain apartment
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| | that they are typically replaced after
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| communities. The upkeep of even a modest
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| | five years of use.Wide Range of
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| community could involve groundskeeping,
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| | Applications
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| unit renovation, and replacements, such
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| | Whether the community was recently
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| as parking lot asphalt and fencing.
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| | purchased, has been owned for a while or
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| Another steep expense is federal income
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| | is on the market to be sold, a cost
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| tax - and in some areas an additional
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| | segregation analysis can help at any
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| state tax on income - but through an
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| | stage of ownership by reducing federal
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| innovative study known as cost
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| | income taxes and showing future
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| segregation, the depreciation of property
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| | depreciation. The optimum time to do this
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| components can be used to help lower
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| | is preferably as soon as ownership is
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| federal taxes.Today, more apartment
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| | taken, whether the property was bought or
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| investors, especially those whose
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| | built. Any commercial property built
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| occupancy rates are challenged by the
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| | after Dec. 31, 1986, is eligible, and
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| nation's single-family housing, are
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| | there are "catch-up provisions" to
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| taking a close look at every possible
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| | accommodate higher savings in the first
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| avenue to lower costs. That's a
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| | year when a cost segregation study is
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| frustrating task in the apartment
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| | completed for communities that have been
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| business. One historically underused
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| | owned for several years.Communities of
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| technique for saving money, in this case
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| | all sizes can benefit, from small
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| saving taxes, is to ensure that all
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| | communities of fewer than 10 apartments
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| depreciable items are reflected
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| | to communities that span several city
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| accurately on tax returns.Those items are
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| | blocks. If the property has an assessed
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| not limited to copiers, automobiles and
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| | value of at least $200,000, the cost
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| heavy equipment. The list extends to a
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| | segregation evaluation can almost always
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| wide range of buildings and improvements.
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| | produce substantial federal income tax
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| In fact, the IRS recognizes 130 items
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| | savings.Preparing for a Study
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| that depreciate over much shorter time
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| | A small amount of an owner's time is
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| periods than the standard depreciation of
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| | required when working with a consulting
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| 27.5 years for an apartment community.
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| | firm that specializes in cost
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| Many of those items, such as parking
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| | segregation. And it is advisable for the
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| surfaces, landscaping and even certain
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| | owner's CPA or tax accountant to
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| wall coverings, are present in large
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| | collaborate with the consultant, ensuring
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| proportions on typical apartment
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| | the most advantageous application for
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| communities.A cost segregation analysis,
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| | that owner's particular financial
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| when reflected on deprecation schedules,
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| | circumstances.The original purchase price
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| reduces taxable income now and also
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| | of the apartment community is the cost
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| defers taxes on capital gain amounts
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| | basis, so owners receive savings on their
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| until the community is sold. At that
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| | initial investment, as well as on
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| time, the recapture of taxes on the extra
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| | improvements. With research that is both
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| depreciation taken can occur at a much
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| | quantitative (square footage of asphalt,
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| lower rate than the 35 percent max tax
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| | pavement, ect., or quantities of wall or
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| rate that was avoided with the extra
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| | window coverings, ect.) and qualitative
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| losses.Don't forget the time value of
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| | (judgment of remaining life) a
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| money by deferring that inevitable tax by
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| | specialized analysis and calculation is
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| a few years. In light of the 130
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| | conducted before a report is issued. This
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| IRS-identified "short life" items, this
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| | report becomes the backup documentation
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| conservative tax-planning tool can help
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| | for federal income tax returns.Patrick
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| apartment owners allocate more costs to
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| | O'Connor, MAI, is president of O'Connor &
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| five-year, seven-year, 15-year and
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| | Associates. The firm, in business since
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| 27.5-year improvements versus the land
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| | 1974, specializes in state and federal
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| value on apartment communities.Apartment
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| | tax reduction services, real estate
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| communities, according to IRS rules,
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| | appraisals and research and consulting
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| depreciate over the course of 27.5 years.
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| | nationwide. With offices in Houston,
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| This is 10 years less than the
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| | Dallas, Los Angeles and Newport Beach,
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| depreciation estimated for office, retail
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| | the firm employs more than 130 people.
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| and industrial properties, which equal
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| | Patrick O'Connor is frequently
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| quicker savings for apartment community
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| | acknowledged by national publications as
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| owners. Items that are found in every
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| | a respected source of information on real
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| apartment, such as carpet, linoleum,
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| | estate trends.
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| window treatments and appliances, are
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