KAHN, LITWIN, RENZA & CO., LTD. - Ernst & Morris · KAHN, LITWIN, RENZA & CO.,LTD., MAKING A...
Transcript of KAHN, LITWIN, RENZA & CO., LTD. - Ernst & Morris · KAHN, LITWIN, RENZA & CO.,LTD., MAKING A...
C A S E S T U D YC O S T S E G R E G A T I O N
A PROVENPROCESS: Key to defendingan IRS cost segregationaudit.
K A H N , L I T W I N ,
R E N Z A & C O . , L T D .
The ChallengeSuccessfully defending an IRS audit on a complex cost segregation study that had beencompleted for a CPA firm’s client a few years earlier.
The ProcessFollowing a deliberative, multi-phase approach when conducting cost segregationstudies. Having all supporting documents readily available to defend an IRS audit if oneis selected. Remaining current on all revenue procedures and tax law thereforemaintaining strict adherence should an audit occur.
The BenefitsA smooth audit process with 100% defensible material contained in the original costsegregation study. The IRS concluded no adjustments were necessary. Additional auditsfor the same client were deemed unnecessary. Improved the cash flow of the clientthrough tax deferrals.
14
Partnering with Ernst &Morris awards strongbenefits to both CPAfirms and their clients.
“Our CPA clients find partnering with us
to be as seamless as working with their own
staff,” Morris said. “In fact, we see our-
selves as being part of their team through-
out the cost seg process.”
KLR principal D’Andrea viewed a prime
benefit of partnering with E&M from
another perspective. “Their extensive
knowledge of current legislation, regula-
tions, revenue rulings,
court cases, building con-
struction, and engineering
provide us with thorough
and highly supportable cost
segregation analyses,” he
said. “That enables our
clients to maximize depre-
ciation benefits, decrease
current taxes, and improve
cash flow.”
CPA firms have found that, by partner-
ing with E&M, the client’s benefits of cost
segregation studies can outweigh their cost
by a factor of ten or more. “What’s more,”
Morris asserted, “it’s reassuring to our
partnering CPA firms and their clients that
every cost seg study we complete is sup-
ported by a defensible interpretation of
applicable and current
tax laws and regulations,
is thoroughly document-
ed, and is 100% audit
ready.”
“We saw first hand
what partnering with
E&M was all about by
the way they stood
behind their conclusions
during the audit process,” D’Andrea
summed up. “From day one, E&M’s policy
has been clear: should any cost segregation
study they perform become the subject of
an IRS audit, E&M will defend the study
until a satisfactory conclusion has been
reached, including 40 gratis hours. We pass
along that same kind of confidence to our
clients.”
C A S E S T U D YC O S T S E G R E G A T I O N
K A H N , L I T W I N ,
R E N Z A & C O . , L T D .
Ernst & Morris Consulting Group, Inc.SINCE 1993
2190 Dallas HighwayMarietta, Georgia 30064
i n f o @ c o s t s e g . c o m1 . 8 0 0 . C O S T S E G
w w w . c o s t s e g . c o m
Ernst & Morris Consulting Group, Inc.,
America’s oldest and largest firm dedicated
solely to performing cost segregation studies,
is staffed by professionals with over 100
years of combined experience in the fields of
engineering, audit, appraisal, construction,
and depreciation tax accounting. Since 1993,
E&M has performed more than 8,000 cost
seg studies—in all 50 states—enabling clients
to defer over $1 billion in taxes. Ernst &
Morris currently works with hundreds of CPA
firms nationwide and is the preferred cost seg
study provider for CPAmerica International, a
worldwide network of independent accounting
firms, and the National Society of
Accountants (NSA).
“We are confident thatE&M’s cost seg studyconclusions will standup to IRS scrutiny.Their successful IRSaudit experience isunmatched among costseg providers.”
ROBERT D’ANDREAKLR
KLR’s challenge: A client’s cost seg study faces an IRS audit
C A S E S T U D YC O S T S E G R E G A T I O N
K A H N , L I T W I N ,
R E N Z A & C O . , L T D .
Afew years after KLR began work-
ing with Ernst & Morris
Consulting Group, Inc., they
received an Information Document
Request (IDR) from the IRS related to a
study for a complex medical office build-
ing in Lincoln, RI.
“We were surprised that, 18 months
after the completion of this cost segrega-
tion study, the IRS now wanted to audit it,”
Robert D’Andrea, CPA/MST, a principal at
KLR, said. “For this $4.4M building, the
E&M study had reclassified over $1.7M in
tax deferrals. I contacted Mike Morris
right away.”
E&M managing director Morris quickly
put D’Andrea’s mind at ease. “I assured
him that after doing more than
8,000 cost seg studies, we had
experienced the audit process
many times,” Morris said. “I
told him that every step we
take in our cost segregation
process ensures that we can
defend an audit efficiently and
successfully.”
Mor r i s a l so adv i sed
D’Andrea that the number of
IRS cost seg audits has
increased over the past few
years and that it was nothing to be anxious
about. “The IRS’s current audit guide
describes what should
be contained in a qual-
ity cost seg study,”
Morris continued. “By
ensuring that our stud-
ies comply with this
guide, we defend our
studies successfully.”
D’Andrea had first
met Mike Morris at a
conference of Leading
Edge Alliance (LEA)
accounting firms. It
w a s t h e r e t h a t
D’Andrea learned of the extensive experi-
ence that Ernst & Morris had in performing
hundreds of engineering-based cost seg
studies for LEA and CPAmerica
International firms. “I was also impressed
that Morris had a background with a
national accounting firm,” D’Andrea said,
“and that his team had come up through
the ranks working with numerous CPA
firms across the country.”
F I R M P R O F I L E :K A H N , L I T W I N , R E N Z A & C O . , L T D . , M A K I N G A D I F F E R E N C E A M O N G N E W E N G L A N D C P A F I R M S .
KLR, founded in 1975, is the largest accounting and business
consulting firm in Rhode Island and, according to Practical
Accountant magazine, the fastest-growing CPA firm in New
England. This 100-person firm provides its clients with work-
able, cost-effective solutions to an ever-expanding list of
accounting, tax, and business needs. KLR is a founding mem-
ber of the Leading Edge Alliance (LEA) and also a member of
Kreston International. These affiliations enable KLR to offer accounting services to clients
throughout North America and abroad.
“We work closely withthe CPA and their clientin deciding how aggres-sive the cost seg studyshould be, which ‘grayareas’ made sense, andassuring that the conclu-sions are defendable.This—and our provendocumentation process—set the stage for a smoothIRS audit defense.”
MIKE MORRISERNST & MORRIS
E&M’s audit process:Making it thorough anddefendable
In addition to conducting thorough engi-
neering-based cost seg studies, as standard
operating procedure, E&M professionals
create detailed files that include all the
construction cost data, color-coded draw-
ings, work papers, photographs, and other
documentation gathered during the study.
As Morris put it, “With this on file, we can
quickly provide our clients with a thor-
oughly detailed audit trail should they ever
need it.”
E&M’s paper-trail process ensures the
study documentation is comprehensive,
defensible, and easily retrievable. “The
files we provide our CPA clients clearly
substantiate any ‘gray area’ that the IRS
may call into question,” Morris added.
“After quickly retrieving our study files, we
carefully reviewed every item and prepared
a formal response to the IRS auditor.”
Though it proved unnecessary, E&M was
prepared to meet with the IRS auditor at
the building site.
The result: No adjustments tooriginal study, noadditional audits
“Just as they do while a cost seg study is
being performed, E&M provided quality
support and kept us informed throughout
the audit process,” D’Andrea claimed.
“They promptly responded to the IRS
inquiries in writing, providing a detailed
rebuttal that included in-depth explana-
tions justifying site and land improvements
totaling over $400,000,” he added.
The IRS was clearly impressed with
Ernst & Morris’ report. After reviewing
E&M’s response and supporting docu-
mentation, the IRS auditors closed the
investigation by concluding that the cost
seg study would be accepted as originally
submitted.
“By making it easy for the IRS auditor to understandthe rationale behind every decision and every claim,no adjustments were imposed.”MIKE MORRIS,ERNST & MORRIS
2
Mike Morris, Managing DirectorErnst & Morris Consulting Group, Inc.
“Based on E&M’s successfuldefense of this first audit, the IRSdetermined that cost-seg audits onsix other properties owned by thesame client were unnecessary.”
ROBERT D’ANDREA, CPA/MSTKLR
ROBERT D’ANDREACPA/MST
KLR’s challenge: A client’s cost seg study faces an IRS audit
C A S E S T U D YC O S T S E G R E G A T I O N
K A H N , L I T W I N ,
R E N Z A & C O . , L T D .
Afew years after KLR began work-
ing with Ernst & Morris
Consulting Group, Inc., they
received an Information Document
Request (IDR) from the IRS related to a
study for a complex medical office build-
ing in Lincoln, RI.
“We were surprised that, 18 months
after the completion of this cost segrega-
tion study, the IRS now wanted to audit it,”
Robert D’Andrea, CPA/MST, a principal at
KLR, said. “For this $4.4M building, the
E&M study had reclassified over $1.7M in
tax deferrals. I contacted Mike Morris
right away.”
E&M managing director Morris quickly
put D’Andrea’s mind at ease. “I assured
him that after doing more than
8,000 cost seg studies, we had
experienced the audit process
many times,” Morris said. “I
told him that every step we
take in our cost segregation
process ensures that we can
defend an audit efficiently and
successfully.”
Mor r i s a l so adv i sed
D’Andrea that the number of
IRS cost seg audits has
increased over the past few
years and that it was nothing to be anxious
about. “The IRS’s current audit guide
describes what should
be contained in a qual-
ity cost seg study,”
Morris continued. “By
ensuring that our stud-
ies comply with this
guide, we defend our
studies successfully.”
D’Andrea had first
met Mike Morris at a
conference of Leading
Edge Alliance (LEA)
accounting firms. It
w a s t h e r e t h a t
D’Andrea learned of the extensive experi-
ence that Ernst & Morris had in performing
hundreds of engineering-based cost seg
studies for LEA and CPAmerica
International firms. “I was also impressed
that Morris had a background with a
national accounting firm,” D’Andrea said,
“and that his team had come up through
the ranks working with numerous CPA
firms across the country.”
F I R M P R O F I L E :K A H N , L I T W I N , R E N Z A & C O . , L T D . , M A K I N G A D I F F E R E N C E A M O N G N E W E N G L A N D C P A F I R M S .
KLR, founded in 1975, is the largest accounting and business
consulting firm in Rhode Island and, according to Practical
Accountant magazine, the fastest-growing CPA firm in New
England. This 100-person firm provides its clients with work-
able, cost-effective solutions to an ever-expanding list of
accounting, tax, and business needs. KLR is a founding mem-
ber of the Leading Edge Alliance (LEA) and also a member of
Kreston International. These affiliations enable KLR to offer accounting services to clients
throughout North America and abroad.
“We work closely withthe CPA and their clientin deciding how aggres-sive the cost seg studyshould be, which ‘grayareas’ made sense, andassuring that the conclu-sions are defendable.This—and our provendocumentation process—set the stage for a smoothIRS audit defense.”
MIKE MORRISERNST & MORRIS
E&M’s audit process:Making it thorough anddefendable
In addition to conducting thorough engi-
neering-based cost seg studies, as standard
operating procedure, E&M professionals
create detailed files that include all the
construction cost data, color-coded draw-
ings, work papers, photographs, and other
documentation gathered during the study.
As Morris put it, “With this on file, we can
quickly provide our clients with a thor-
oughly detailed audit trail should they ever
need it.”
E&M’s paper-trail process ensures the
study documentation is comprehensive,
defensible, and easily retrievable. “The
files we provide our CPA clients clearly
substantiate any ‘gray area’ that the IRS
may call into question,” Morris added.
“After quickly retrieving our study files, we
carefully reviewed every item and prepared
a formal response to the IRS auditor.”
Though it proved unnecessary, E&M was
prepared to meet with the IRS auditor at
the building site.
The result: No adjustments tooriginal study, noadditional audits
“Just as they do while a cost seg study is
being performed, E&M provided quality
support and kept us informed throughout
the audit process,” D’Andrea claimed.
“They promptly responded to the IRS
inquiries in writing, providing a detailed
rebuttal that included in-depth explana-
tions justifying site and land improvements
totaling over $400,000,” he added.
The IRS was clearly impressed with
Ernst & Morris’ report. After reviewing
E&M’s response and supporting docu-
mentation, the IRS auditors closed the
investigation by concluding that the cost
seg study would be accepted as originally
submitted.
“By making it easy for the IRS auditor to understandthe rationale behind every decision and every claim,no adjustments were imposed.”MIKE MORRIS,ERNST & MORRIS
2
Mike Morris, Managing DirectorErnst & Morris Consulting Group, Inc.
“Based on E&M’s successfuldefense of this first audit, the IRSdetermined that cost-seg audits onsix other properties owned by thesame client were unnecessary.”
ROBERT D’ANDREA, CPA/MSTKLR
ROBERT D’ANDREACPA/MST
C A S E S T U D YC O S T S E G R E G A T I O N
A PROVENPROCESS: Key to defendingan IRS cost segregationaudit.
K A H N , L I T W I N ,
R E N Z A & C O . , L T D .
The ChallengeSuccessfully defending an IRS audit on a complex cost segregation study that had beencompleted for a CPA firm’s client a few years earlier.
The ProcessFollowing a deliberative, multi-phase approach when conducting cost segregationstudies. Having all supporting documents readily available to defend an IRS audit if oneis selected. Remaining current on all revenue procedures and tax law thereforemaintaining strict adherence should an audit occur.
The BenefitsA smooth audit process with 100% defensible material contained in the original costsegregation study. The IRS concluded no adjustments were necessary. Additional auditsfor the same client were deemed unnecessary. Improved the cash flow of the clientthrough tax deferrals.
14
Partnering with Ernst &Morris awards strongbenefits to both CPAfirms and their clients.
“Our CPA clients find partnering with us
to be as seamless as working with their own
staff,” Morris said. “In fact, we see our-
selves as being part of their team through-
out the cost seg process.”
KLR principal D’Andrea viewed a prime
benefit of partnering with E&M from
another perspective. “Their extensive
knowledge of current legislation, regula-
tions, revenue rulings,
court cases, building con-
struction, and engineering
provide us with thorough
and highly supportable cost
segregation analyses,” he
said. “That enables our
clients to maximize depre-
ciation benefits, decrease
current taxes, and improve
cash flow.”
CPA firms have found that, by partner-
ing with E&M, the client’s benefits of cost
segregation studies can outweigh their cost
by a factor of ten or more. “What’s more,”
Morris asserted, “it’s reassuring to our
partnering CPA firms and their clients that
every cost seg study we complete is sup-
ported by a defensible interpretation of
applicable and current
tax laws and regulations,
is thoroughly document-
ed, and is 100% audit
ready.”
“We saw first hand
what partnering with
E&M was all about by
the way they stood
behind their conclusions
during the audit process,” D’Andrea
summed up. “From day one, E&M’s policy
has been clear: should any cost segregation
study they perform become the subject of
an IRS audit, E&M will defend the study
until a satisfactory conclusion has been
reached, including 40 gratis hours. We pass
along that same kind of confidence to our
clients.”
C A S E S T U D YC O S T S E G R E G A T I O N
K A H N , L I T W I N ,
R E N Z A & C O . , L T D .
Ernst & Morris Consulting Group, Inc.SINCE 1993
2190 Dallas HighwayMarietta, Georgia 30064
i n f o @ c o s t s e g . c o m1 . 8 0 0 . C O S T S E G
w w w . c o s t s e g . c o m
Ernst & Morris Consulting Group, Inc.,
America’s oldest and largest firm dedicated
solely to performing cost segregation studies,
is staffed by professionals with over 100
years of combined experience in the fields of
engineering, audit, appraisal, construction,
and depreciation tax accounting. Since 1993,
E&M has performed more than 8,000 cost
seg studies—in all 50 states—enabling clients
to defer over $1 billion in taxes. Ernst &
Morris currently works with hundreds of CPA
firms nationwide and is the preferred cost seg
study provider for CPAmerica International, a
worldwide network of independent accounting
firms, and the National Society of
Accountants (NSA).
“We are confident thatE&M’s cost seg studyconclusions will standup to IRS scrutiny.Their successful IRSaudit experience isunmatched among costseg providers.”
ROBERT D’ANDREAKLR