Shopping Mall Valuation
Casualty loss
Casualty loss tax deductions can generate massive death Loss may occur as a result of a flood, hurricane, tornado, mudslide or other natural disaster. The intuitive thought pattern is: "My complex apartment worth $ 5,000,000 suffered major damage totaling $ 1,500,000 for repairs and loss of income. Fortunately, I was completely covered for physical damage and loss of income, other than a small deduction. It is clear that no casualty loss you can claim as a tax deduction, right? "
Tax deductions are the basis for the tax reduction. Tax deductions reduce taxable income, but not directly reduce federal income taxes. For example, $ 100,000 of tax deductions reduces federal income taxes by $ 35,000 ($ 100,000 x 35%), assuming a tax rate of 35%. Most tax deductions require a cash expenditure (labor, materials, supplies, services public, etc.) A cash expenditure for the year now is not necessary for some tax deductions for real estate and may not be required casualty loss. Most real estate owners and investors do not account for casualty losses as a source of tax deductions. Few investors claim casualty loss tax deduction federal tax code allowed. Let's review the criteria for deduction of tax losses of victims and the thought process regarding the acquisition of a property that has suffered a loss. Real estate owners suffer a casualty loss if the value market immediately after the casualty insurance money is less than the market value immediately before the accident. The complex issue is how the value of the property immediately after the incident. Let's consider a suburban office park 1-story in Mississippi, which suffered from 3 meters flooding due to Hurricane Katrina. Let's further assume: 1) 8 feet of sheet rock must be replaced throughout the building to rebuild, 2), although the property was 90% occupied before the flood, occupancy is expected to be only 5%, while rebuilding occurs, 3) stabilized occupancy after renovation is not already clear that some companies can not return, 4) construction will take 12-18 months due to work constraints and 5) the owner has accident insurance reconstruction, but no loss of income or business interruption insurance. It is clear that the market value after the loss is less than the value of market before the claim construction costs less. Other factors to consider are the loss of income, market risk that not enough tenants will available after completion of construction, the cost of construction management, an illiquid market with few buyers right after the accident, construction risk, interest rate risk (interest rates could increase during the construction period negatively affecting the value), the risk that operating expenses could increase during the construction period (perhaps insurance) and compensation for entrepreneurial effort to induce a buyer to coordinate the work of capital, management and remuneration of capital in the process of reconstruction and liberation. A careful analysis by an appraiser can show the result of the improvements have no value after the flood. In the evaluation work done by the writer, a casualty loss of 10-30% market value before the disaster occurred (on a straight-forward, defensible analysis) is typical. This can cause a significant casualty loss (And taxes). For example, a property with a market value of $ 5,000,000 suffers a casualty loss of 30%. While the victim is a difficulty severe for homeowners, the $ 1,500,000 ($ 5,000,000 x 30%) tax deduction to mitigate the financial loss. Congress provided a loss facts incidental tax deduction to encourage investment in real estate. If you have the misfortune to suffer a casualty loss, take the helping hand provided by Congress and take the tax deduction. Click here for preliminary analysis of the economies FREE income tax on your property. Cost segregation produces tax deductions and reduces federal income taxes throughout the country and in all size markets. These are just some examples of cities where cost segregation generates meaningful tax deductions the city.:
- Memphis, TN
- San Francisco, CA
- New Orleans, LA
- New York, NY
- Hartford, CT
- Las Vegas, NV
- Los Angeles, CA
- Atlanta, GA
- Orlando, FL
- Miami, FL
- Louisville, KY
- Salt Lake City, UT
- Boise, ID
- Lakeland, FL
- Wichita, KS
- McAllen, TX
- Columbus, OH
- Ft Lauderdale, FL
- San Antonio, TX
- Durham, North Carolina
- Allentown, PA
- Youngstown, OH
- Little Rock, AR
- Greensboro, North Carolina
- Greenville, SC
- Kansas City, MO
- Raleigh, NC North
- San Jose, CA
- Palm Bay, FL
- Honolulu, HI
Cost segregation produces deductions tax for virtually all types of properties, including the following: Property Type:
- Regional Center
- Service Station
- Pharmacy
- Night club
- Supermarket
- Racket Club
- Auto service garage
- Airplane hangar
- Nursing home
- Housing allowance
Almost all industries, including the following, can generate tax deductions profitable through cost segregation. Industry:
- Nondurable good wholesalers
- Durable good wholesalers
- Day care centers
- Computer and manufacturing electronics
- Health Centers
- Manufacture of chemicals
- Printing activities
- Warehousing and storage
- Electronics and appliance stores
- Apparel Manufacturing
O'Connor & Associates is a national provider of commercial real estate property consultancy services including cost studies segregation, due diligence, income taxes, abandonment studies, business valuations personal property, business valuations, feasibility studies , highest and best use analysis and lease audits.
Our services benefit owners of all commercial property types, including multifamily housing, retail shops, hospitals, hotels, industrial properties, factories, medical offices, commercial offices, restaurants, self-storage units, shopping centers, shopping malls and warehouses and distribution centers.
About the Author
Patrick C. O’Connor has been president of O’Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also a registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes. He continues to set the standard in direction and quality of our appraisal products, adding services ranging from business valuations and business appraisals to cost segregation analysis for income tax reduction.
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