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These cost segregation studies can be performed for buildings and improvements placed in service as far back as the mid 1980s. There is no need to amend returns in order to claim the additional depreciation. In 1999, the IRS announced that it would permit those who have claimed less than the allowable depreciation in prior years to claim the recalculated (or missed) depreciation as a change in accounting method. In 2002, the IRS announced that all of the prior years' depreciation that is allowable under a cost segregation approach could be claimed in the change year. This ability to claim several years' worth of depreciation in a single tax year can produce a potentially huge benefit. You will need to have your CPA calculate the additional depreciation and file Form 3115, Application for Change in Accounting Method, in order to claim the deduction on your tax return. A newly placed in-service building or tenant improvement in the year of the cost segregation study would not require the Form 3115 to be filed. Not all buildings or renovations will benefit from a cost segregation study. For example, if an owner is subject to passive activity limitation of IRC Sec. 469, the additional depreciation deductions would not lead to immediate reduction in taxes due. Passive activity losses that are disallowed under IRC Sec. 469 are suspended and carried forward to a year in which there is passive income or there is a disposition of the entire property in a taxable transaction. Also, if you are planning to sell the building in the near future, say three to five years, the benefits of the cost segregation study will be reduced due to the depreciation recapture provisions of the tax code. As with most decisions relating to provisions in the tax law, there are very few cut-and-dried answers. You will need to analyze the cost versus benefit of the cost segregation study to determine if the cash flow warrants moving forward with the study. Always keep your team of professionals informed as to your wishes and opportunities to make sure you are getting the proper advice and guidance. Jeff Jackson, CPA, is a shareholder at Sol Schwartz & Associates, PC. Jeff has been a certified public accountant since 1992 and has been in public accounting since 1990. Jeff focuses on all areas of taxation and financial planning, including individual, partnership and corporate income taxation, along with estate, gift and retirement planning. He relies on his business and investment experience to identify the many issues his clients may face, particularly in working with high net-worth individuals, their families and closely held businesses. Contact Jeff at 210-384-8000, ext. 144, or via email at jbj@ssacpa.com. ■ For more than 30 years, Strasburger attorneys have provided comprehensive, creative and cost- effective legal services to clients in the health care industry. Our team members collaborate and take a 360-degree approach to assist physicians, hospitals, health care facilities, health systems and other organizations on matters relating to: BUSINESS AND TRANSACTIONS | OPERATIONAL AND REGULATORY ISSUES | REIMBURSEMENT SPECIALTY HEALTHCARE AREAS | INTELLECTUAL PROPERTY | LITIGATION AND ALTERNATIVE DISPUTE RESOLUTION For more information, please visit www.strasburger.com Austin Collin County Dallas Houston 300 Convent Street, Suite 900 | San Antonio, Texas 78205 New York Washington, D.C. Mexico City - Strasburger & Price, SC 210.250.6000 telephone MDNEWS.COM ■ MD NEWS San Antonio | 11