Component detail
What is on the schedule
The component-level detail behind your existing depreciation schedule, organized for your CPA's computations.
Exit Planning: Recapture & 1031 Coordination
Accelerated depreciation is a timing benefit, and the exit is where the timing comes due. We work with your CPA before a sale or exchange so recapture and the 1031 rules are planned for in advance.
Acceleration is a timing benefit. The exit is where timing comes due.
Depreciation recapture applies to depreciation allowed or allowable, so it exists whether or not a property had a study. What a study changes is the character and the timing of the deductions, and that is worth planning around before a sale or exchange, not after.
We coordinate with the investor's CPA on recapture and on 1031 exchanges, using the component detail behind the existing schedule. Depreciation recapture and 1031 exchanges and cost segregation explain the rules in more depth.
At the exitWhat the component detail feeds
Taxable sale
- Depreciation on §1245 property is recaptured as ordinary income
- Depreciation on the real property can produce unrecaptured §1250 gain, taxed at a capped rate
- Basis already removed through partial dispositions is no longer exposed
§1031 exchange
- Gain on real property can be deferred
- §1245 recapture can still arise where personal property given up is not matched
- The replacement property is studied, and carried-over and added basis are handled under the regulations
The rules turn on the facts and on your CPA's return-level decisions. We provide the engineering and the component detail; your CPA and qualified intermediary run the transaction.
Support for the CPA running the exit
Before the sale
Partial dispositions
Retired components identified and valued, so their remaining basis is not still sitting on the schedule at exit.
In an exchange
The replacement property
An engineered study of the replacement property, coordinated with your CPA and your qualified intermediary.
Before the contract, not after the closing
Considering a sale
Review the schedule
What has been claimed, what has been retired, and what is still on the books.
Before the contract
Model with your CPA
Sale or exchange, and what each means for recapture.
At closing
Support the allocation
Component detail for your CPA's computations.
After an exchange
Study the replacement
The new property goes onto the schedule in the right recovery periods.
Exit planning questions
Still have a question? Ask Engineering.
Does cost segregation create recapture?
Recapture applies to depreciation allowed or allowable, so it exists whether or not you had a study. What a study changes is the character and timing: depreciation on §1245 property is recaptured as ordinary income on a taxable sale. The trade-off between the earlier deductions and the later recapture is worth modeling with your CPA before a sale.
Can a 1031 exchange defer recapture?
It can defer gain on the real property, but §1245 recapture can still arise where personal property given up is not matched by like property in the replacement. The structure has to be planned with your CPA and your qualified intermediary.
When should we involve you?
Before the sale or exchange is under contract. Partial dispositions, the allocation of the sale and the study of the replacement property are all easier to plan than to repair.
What do you provide?
The component detail behind your existing schedule, partial disposition analysis where components were retired, support for your CPA's recapture computations, and a study of the replacement property in an exchange.
Get a Commercial Savings Estimate
Fixed-fee proposal in 24 to 48 hours.
- Prepared by Engineering
- Lifetime audit defense
- NDAs available
info@senecacostseg.com
1210 Jackson St SE, Suite 2, Albany, OR 97322
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