Medical Practice Grouping Rules Case Study

Case-study issue

A physician owned the building used by his medical practice through a separate LLC. A cost segregation review appeared to create useful depreciation, but the first read was that the deductions were trapped because the building was treated separately from the active practice.

After the taxpayer facts were reviewed with the CPA, a grouping election path was evaluated. The planning made the building depreciation usable against practice income and produced more than $68,000 of benefit across the following three years.

Why it matters

The building was not the whole study. The taxpayer was the study. Ownership, activity, entity, and participation facts decided whether the technical depreciation result could actually help.

Planning checks

• Is the property rented to a related operating business?
• Are activity and grouping facts being reviewed before deductions are assumed unusable?
• Does the CPA have enough support to evaluate the election path?
• Would entity structure, participation, or documentation change the answer?

JPOPE planning lens

Tax value is created when the property analysis and taxpayer analysis meet. A depreciation study without usability review is incomplete planning.