Construction Company
Our clients include general contractors as well as specialty subcontractors who are involved in public, private, commercial, institutional, and residential construction projects with both national as well as regional firms. Our Construction Accountants can also assist the many firms associated with the larger construction projects from electrical to mechanical, plumbing, and sustainable building systems engineers necessary to bring a project to completion.
We prepare, compile, review, and audit financial statements, for use by bonding companies and financial partners, all with an eye for encouraging those that need accounting for real estate investments. We use percentage of completion and completed contracts revenue recognition methods.
We establish accurate job costing and systematic allocation of indirect costs.
By combining our robust data analysis software, and our human-side expertise in all things pertaining to real estate accounting, we evaluate your business operations, your business plan, and your tax strategy to improve profitability. We provide bookkeeping and payroll assistance for many of our construction clients.
The need for sound business advice starts with a professional assessment, which requires an accurate accounting for real estate acquisition, development and construction costs.
“The real estate (RE) industry seems to be on an accelerating disruption curve highlighted by rapid changes in tenant dynamics, customer demographic shifts, and ever- increasing needs for better and faster data access to allow improved service and amenities.” ~ Deloitte Commercial Real Estate Outlook 2018.
STRATEGIC REAL ESTATE TAX
Strategic tax planning is essential for achieving financial success in real estate development. Navigating market uncertainties and adapting to legislative changes are crucial for optimizing tax benefits and mitigating liabilities. At Big Bear, we specialize in guiding developers through the intricacies of property tax appeals to ensure maximum profitability for your projects.
Looking to unlock even more savings on your projects?
LEVERAGING 1031 EXCHANGES FOR OPTIMAL TAX BENEFITS
1031 exchanges, named after Section 1031 of the Internal Revenue Code, offer a powerful strategy for real estate developers looking to defer capital gains tax. By swapping one investment property for another of similar kind, developers can delay paying capital gains tax, thereby optimizing cash flow and facilitating portfolio growth.
Delayed Exchange: The most common type, allowing developers 45 days to identify replacement properties and 180 days to complete the transaction.
Build-to-Suit Exchange: Tailored for developers looking to construct or improve the replacement property using the sale proceeds.
Reverse Exchange: Ideal for acquiring the replacement property before selling the relinquished one.
Tenancy-in-Common Exchange: Enables multiple investors to participate, providing flexibility in property ownership.
Strategic Insights: Optimizing 1031 Exchanges
For developers, understanding the nuances of different 1031 exchanges is crucial. Identifying the right type of exchange based on the project’s needs and timelines can significantly impact the financial outcomes. Additionally, staying compliant with the IRS guidelines and meeting the necessary deadlines are essential for successfully leveraging this tax-deferral strategy.
Innovative tax-saving strategies hold paramount significance in real estate development. Establishing an S Corporation as the developer entity is a notable strategy, offering a three-step approach that can secure favorable tax treatment for pre-development appreciation and effectively reduce the overall tax burden.
Avoidance of Adverse Tax Results: The S Corporation structure avoids potential double taxation and adverse tax results, ensuring favorable tax treatment for pre-development appreciation.
Reduction in Federal Income Tax Liability: Developers can achieve an overall reduction in total federal income tax liability, maximizing after-tax returns on real estate development
Insight: Comparing Tax-Saving Strategies
Developers should explore and compare various tax-saving strategies to determine the most beneficial approach. Assessing the implications, compliance requirements, and financial outcomes of different strategies is essential for making informed decisions and optimizing tax savings.
Smart contracting strategies are critical for managing project budgets, schedules, quality, and stakeholder expectations. Developers should implement competitive bidding procedures, obtain comparative bids, and mindfully select contract types, such as Lump Sum, Time and Materials, Cost Plus, and Cost Plus with Guaranteed Maximum Price (GMP).
Selecting strong cost-of-work definitions, especially with a GMP contract, helps manage and control costs. Clear cost-of-work definitions and right-to-audit clauses are essential for efficient validation of compliant project charges and achieving project goals.
Developers should engage experienced construction auditors and seek professional advice to align best practices with contracting strategies. This approach increases tax savings, ensures project budget compliance, and contributes to the successful implementation of tax and contracting strategies in real estate development.
Big Bear is dedicated to supporting developers at every stage of the development process. Whether proactively planning before site acquisition or addressing property tax considerations post-acquisition, our team of experts is committed to ensuring that developers achieve the most favorable tax outcomes and avoid unnecessary financial burdens.
CONCLUSION
Strategic tax planning and proactive property tax considerations are pivotal for real estate developers aiming to maximize savings and enhance project profitability. By leveraging a myriad of tax strategies, from 1031 exchanges to innovative tax-saving approaches, and by partnering with experts like Big Bear Taxes are well-positioned to navigate the complexities of the tax landscape and achieve lasting financial success. We encourage developers to explore these strategies and seek professional advice for tailored solutions that meet the unique needs of each project.