Tangible Property Analysis (TPA) Consulting

Expense Policy Test (EPT) for Routine Maintenance Safe Harbor (RMSH), De Minimis, and Small Business Safe Harbor (SBSH)

Capstan works with clients to maximize the expensing of assets using the Expense Policy Test (EPT). Capstan reviews the scope of work and guides taxpayers and their advisors in the strategic application of these safe harbors to maximize their utility.

Betterment/Adaptation/Restoration (BAR) Test

Capstan understands the complexity inherent in the Tangible Property Regulations (TPR) and the subsequent difficulties that may arise when determining if capital projects meet the IRS definitions of Betterment, Adaptation, or Restoration. Capstan engineers will apply the BAR test to determine whether a given cost represents an improvement to a taxpayer’s tangible property in the form of a Betterment, Adaptation, or Restoration. If so, the cost must be capitalized. If the cost is not determined to represent an improvement, it may be expensed. The TPRs provide a framework that guides the nuanced decision-making process. Engineers will also apply a subsequent Materiality test to determine the impact of the cost in relation to the appropriate building system.

Partial Asset Disposition (PAD) Analysis

The IRS has formally approved the ability to dispose of the remaining cost basis of assets previously retired, replaced, or demolished. This is outlined in the Tangible Property Regulations (IRC §1.168 (i)-8) and can be a tremendous vehicle for tax savings.

The Capstan process includes a review of the existing depreciation schedules, demolition drawings, and other pertinent information. The team also assesses the scope of recently completed capital work to determine the potential for disposition. When this review identifies assets ripe for disposition—but does not warrant a Standard Cost Segregation Study—Capstan suggests our Partial Asset Disposition (PAD) Analysis.

As defined in the Tangible Property Regulations, a PAD Analysis may be conducted in one of three ways:

  • A full engineering-based cost methodology, such as cost segregation
  • A pro rata pricing process (if original pricing for a property is available)
  • A Producer Price Index calculation as outlined in the Tangible Property Regulations

The outcome of a Capstan PAD Analysis is a report that quantifies and presents the value of dispositions, outlines when the assets were placed into and taken out of service, and describes the asset(s) in question. With this information, the client may determine the remaining depreciable basis to support a Partial Asset Disposition election.

A PAD Analysis can also be used to update existing Unit of Property values.

As with most all strategies identified in the Tangible Property Regulations, the benefit of this effort is determined by each project’s facts and circumstances. The personal attention each client receives in the “Consult” phase of The Capstan Course will ensure that our team fully understands your unique situation.

Services for CPAs

In the face of growing tax code complexity, it’s almost impossible to cover every area with in-house resources. For expertise in understanding and applying the myriad of complexities with the Tangible Property regulations and other IRS Code impacting commercial real estate, turn to Capstan Tax Strategies.

Services for Business Owners

Accelerating depreciation has long been a strategy employed by real estate owners to take advantage of immediate tax savings. The Tangible Property Regulations and the recent Tax Cuts and Jobs Act has created significant opportunities that elevate the many uses of Cost Segregation Studies. Learn how Capstan can help.

Stay Focused

You don’t have to be overwhelmed by Tangible Property and other Fixed Asset Regulations. We help you maximize your tax savings so you can focus on the core of your business.