Bedford’s ReCap℠ study is designed for taxpayers seeking to take advantage of the Tangible Property Regulations regarding the deduction and capitalization of expenses relating to the acquisition, renovation, improvement, or disposition of real estate.
These new regulations can provide significant tax benefits, even if a cost segregation study has been performed. Essentially, a ReCap℠ study will identify certain capitalized items and if applicable, reclassify them as repairs, changing the deduction significantly in the taxpayer’s favor. In addition, the study may identify assets that may have been disposed of during the process of performing renovations.
A capital improvement is the addition of a betterment, the restoration of some aspect of property, or that will change the property to a different use. A betterment will either materially enhance the property’s value, efficiency, productivity or correct a material defect.
A repair expense restores a property to its regular efficient operating condition. This includes the testing, inspection and routine maintenance necessary to keep the property in operating condition. A repair may be taken as a deduction in the current year. By taking current deductions of previously capitalized repair and maintenance costs, taxpayers can realize immediate benefits.
Although the concept of repair vs. capitalization is simple the implementation and development of supporting documentation requires access to a high-level of tax expertise, construction or engineering experience.
Bedford’s ReCap℠ Study
Bedford’s ReCap℠ study includes a complete analysis of the taxpayer’s buildings and improvements to determine appropriate Unit of Property for capitalization and depreciation purposes. Our engineers will identify routine repair and maintenance expenses that may have been capitalized and depreciated incorrectly. Additionally, the asset detail contained in a ReCap℠ study will enable taxpayers to write down building assets that will be potentially removed in the current or future years. This analysis could result in a reduction in tax liability; generating tax refunds and ultimately improving cash flow.