FINANCIAL STRATEGIES Smart use of fiscal planning & action
Burnt Out
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ALEC J. PACELLA
he 1991 BMW 7 series was the first regular production automobile to offer Xenon headlamps. The automotive press lauded the crystal-clear white light as a revolutionary upgrade and a seed was planted in my mind. It took a few years to be in a position to afford a car that had these coveted headlamps and even then, it was a stretch. But once I had that car with those headlamps, it was indeed a significant improvement over the older halogen bulbs. All was good for several years until one of the headlamps stopped working. Unable to roll into my local AutoZone to buy a new Xenon bulb, I took it into my friend, Tom the mechanic. I certainly wasn’t prepared for his diagnosis. He needed to replace the entire housing, as it was a sealed unit that included the Xenon light, the daytime running light, the turn signal light and a motor that turned the lamp slightly whenever the car was steered in a left or right. The good news – new housings were almost $2,000 but he found a used one for $900. The bad news – two weeks later, I was right back in Tom’s shop because the other side stopped working.
The IRS introduced the concept of cost segregation in 1997. Like Xenon headlamps, this concept was a significant improvement over the standard cost recovery deduction as it allowed a taxpayer to significantly accelerate the depreciation schedule on specific categories of property assets. But also, like Xenon headlamps, there are a few things that can cause a taxpayer to get knocked back on their heels. To better understand some of these pitfalls, read on.
Passive can be aggressive
If the real estate investment is considered by the IRS to be a passive activity for the taxpayer, the tax deduction asso-
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Properties | April 2026