A cost segregation study should be on the mind of anyone who is considering an acquisition of a company with extensive tangible property assets. What immediate action should be undertaken by acquirers in a taxable asset transaction? The answer is to conduct a cost segregation and valuation of personal and real property assets - at the time of the transaction - to ensure the allocation of value is included in the purchase agreement — to allocate as much value as possible to non-real property assets.
With the new tax bill, the impact of capital expensing comes into focus for any taxable acquisition. Why? First, the new tax bill allows companies to immediately expense capital expenditures for a five-year period, retroactively effective as of September 27, 2017. Second, and perhaps the most substantial change to depreciable lives in the tax bill, is that bonus depreciation is now expanded to allow for the eligibility of “in-use” assets, which had been previously exempt from bonus altogether. This is a significant change, as it will motivate buyers to attempt to allocate more of the total purchase price of a business to personal property assets in the purchase price allocation negotiations.