Federal Depreciation Look-Back Analysis

The Importance of Investing in the Future By Looking Into the Past

Cash flow has always been important. But in today’s business environment it is more important than ever. Companies won’t be around tomorrow if they don’t have sufficient cash flow today to support their operations, research, and infrastructure. To preserve cash, companies reduce spending and cut costs, and frequently bypass business opportunities because they can’t be funded based on forecasted cash flow.

A dollar today is worth more than a dollar tomorrow. A very simple concept, but how can this dollar be obtained today? A Federal Depreciation Look-Back Analysis from General Financial and Tax Consulting can capture tomorrow’s dollars today and let you invest this dollar into areas that will contribute to future growth.

Our Federal Depreciation Look-Back Analysis has the potential of improving cash flow by reducing current federal and state income tax. In simple terms, our process enables a company to accelerate federal tax depreciation into the current year from investments made in buildings and other fixed assets in the past. The cash savings realized from our anaysis can be used in your business today.

The key to the success of this analysis is a detailed review of the classification and categorization of assets. Classification errors and componentizing assets create tax benefits and increase cash flow. While this tax benefit would have been realized over time, say over the next 7 to 10 years, because of our analysis, the benefit can be realized and used today.

Almost any type of company that has made a significant investment in capital assets or has made an acquisition that included capital assets can benefit from our Federal Depreciation Look-Back Analysis. At a minimum, every company should consider having an analysis of their fixed assets performed to see if there is any potential benefit.

How It Works

GFTC performs a review of a company’s fixed asset ledger and provides the company with a preliminary estimate of the benefit. In some instances, we may request a walk-through of one or more of your facilities to familiarize our staff with your business operations. However, the entire preliminary phase requires only minimal time and involvement from your company. Until the decision is made to move forward with the detailed analysis, you won’t incur any costs or fees.

Based on historical experience, approximately 20% of the capitalized costs of fixed assets can be reclassified and/or componentized. Many factors contribute to the amount of the tax benefit, including fixed asset values, the age and mix of these assets, the type of business or businesses in which the company is engaged, and the initial decisions of how to classify and categorize assets. It is our experience that the majority of businesses can realize a benefit.

How You Can Benefit

Through asset reclassification and componentization, GFTC helps companies create a tax reduction that can be converted into cash that becomes available immediately. Almost all assets with a remaining depreciable tax value can provide a Federal Depreciation Look-Back benefit. To determine the benefit, a thorough analysis and componentization study of each asset is required to calculate the “catch up” depreciation amount. The following asset categories provide the majority of the benefit:

Get Started

Whether you are ready to get started or have additional questions, the first step is to contact GFTC. We want to hear your questions and explain how we can work with you. Many of our clients have similar questions, and you may be able to benefit from their experience. Start by filling out and submitting the contact form on this web site. If you would like additional information, have more questions, or want to discuss your situation, call us at (800) 733-5252 ext. 7000.