Commercial Investment Real Estate July/August 2018 | Page 21

Foundation, for example, estimates the median audit fee in 2015 at $522,205. Avoiding Audits “The IRS believes that some developers have been using CCM incorrectly.” CCM still is a valuable and accepted account- ing tool. Since land developers and CCM accounting are receiving attention, it is critical to address strategy and proper application of the rules. Commercial real estate professionals can best protect their businesses in the following four ways. First, make sure the company meets CCM criteria as outlined by the IRS. Many nuances surround the use of CCM. It’s pos- sible to unintentionally use it incorrectly. Stay within the guide- lines for best protection against audits. Second, to better understand the tax liabilities in various situations, create models for tax implications with and without CCM. Sophisticated tax analysis is easier with specialized tax and accounting software, which allows companies to see the outcomes of different tax scenarios over multiple years. Third, analyze past data and take corrective action. Strategic analysis of past CCM accounting usage can help land developers identify areas of concern. Some- times companies can file amended returns, if they have not used CCM over multiple years. However, if incorrect returns have been filed for more than two years, commercial real estate professionals will need to file Form 3115 to apply for a change in accounting method. Finally, continue to evaluate tax strategies. Regularly create models for what-if scenarios and follow the latest IRS guidelines to help dictate future tax strategies and ensure compliance with current rules and regulations. A proactive approach to accounting and compliance will posi- tion a company for success and minimize its audit risk. If an IRS inquiry occurs, these preventive measures will allow the company to respond quickly, potentially save money, and reduce the count- less hours of work needed to comply with an IRS audit. Diane Tinney is director of product management at Bloomberg Tax Technology in the Washington, D.C., metro area. Contact her at [email protected]. Life with The Pin CCIM Institute provides its members with the most sophisticated knowledge, technology, and operational platform to power their business. CCIM Membership Benefits: Lifelong Learning STDB Free and discounted courses covering crowdfunding, big data, and more. The industry’s best digital toolkit for market analysis. FindaCCIM.com and CCIM Connect CIRE Magazine Subscription An exclusive global network for business and industry intelligence. The award-winning publication that covers market trends and innovations. Affinity Provider Program DealShare Exclusive discounts on travel, tech tools, printing, and more. A database of listings not found anywhere else. Experience life with the pin. Visit www.ccim.com/benefits CCIM.COM July | August 2018 19