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Commercial Property Benefit
- 1. Commercial Property Benefit Learn how a Cost Segregation study can improve your cash flow and lower your taxes
- 2. What Is Cost Segregation? Basically, cost segregation reclassifies real and personal property construction costs in a commercial property Historically, most if not all of a building was classified as real property and depreciated over 39 years. Personal property can be depreciated over as little as 5-7 years, dramatically improving cash flow
- 3. How Does This Get Done? With a properly done Cost Segregation study, the individual characteristics of the components of your building are broken out, or segregated, from the whole. Why? Because some components, like carpeting, asphalt, specialty wiring etc wear out long before 39 years. It doesnt make sense to depreciate them over 39 years if they only have a five or seven year lifespan.
- 4. What is the Benefit? Ifyou win the lottery, would you take the prize over 30 years or upfront? Money now is worth more to you than money 30 years from now. Cost-seg accelerates the depreciation of your building for tax purposes, reducing your taxes, while utilizing the look back provision can generate a sizeable IRS refund upfront.
- 5. Will This Cause an Audit? In 1997, a landmark case with Hospital Corp of America took place in which the IRS admitted that cost segregation was a valid process. In 1999 they issued a Legal Memorandum which said that a properly done cost- seg study would not be contested. In 2004 the IRS reaffirmed the strategy by issuing the Cost Segregation Audit Guide.
- 6. How Much is the Benefit? The amount of the benefit is based on a number of factors, such as the number of years the building has been owned, if there have been any recent renovations, the purpose of the building, and other factors. In general, for every $1 million of cost that can be re-classified, the average benefit is approximately $150-160,000 We have saved clients over $152,000,000
- 7. How Much is this Going to Cost? Inthe past, because of the technical and engineering requirements for a successful cost segregation study, only the biggest companies were able to hire qualified consultants with huge upfront costs. Now, firms like ours have specialists who do nothing but cost-seg and are able to do it for a fraction of the cost than in the past.
- 8. Low Cost, Guaranteed Results Our guarantee to you is that if we determine that you are not going to benefit from a cost segregation study, there is no charge to you. If we do find a benefit to you, and 90% of the time we do, our fee is guaranteed to be a small fraction of the benefit. Fee will be quoted as a fixed amount, but will not exceed 10% of benefit. Fee quoted upon completion of initial analysis
- 9. Who Benefits From Cost Seg? Must be a commercial property- hotels, restaurants, apartments, nursing homes, automobile dealers, manufacturing all good prospects for cost segmentation benefits Must be a For-Profit entity Target Building cost: $1-10 million Not planning to sell within 24 months at minimum, preferably not within 5 years
- 10. Why Havent I Heard About This? CPAs in general only advised of this since 2004. Some still think of old disallowed rules regarding component depreciation. CPAs not generally engineers as required Engineering based studies required per IRS guidelines. Our consultants are experienced engineers and specialize in cost segmentation. Engineers generally not good salespeople!
- 11. Leaving Money on The Table? Ifyou havent looked into doing a cost segmentation study for your business, you are probably paying too much in taxes. You still have to pay taxes, but you dont need to leave a tip!
- 12. Make an Informed Decision Contact us to see how this would impact your business Learn why you should or should not do a study Make an informed decision. We welcome the participation and partnership of your CPA
- 13. How We Work With Your CPA We partner with your CPA in this process We provide your CPA precise information to maximize your benefits according to the law We do the engineering study that is required by IRS guidelines then work with your CPA to complete the proper forms such as the Form 3115 to maximize your refund Make sure study passes IRS engineering guidelines
- 14. Next Steps Contact us to request a study We review initial information provided to determine feasibility Complete study performed and fee charged Implement with CPA to apply to your financials See the improved financial results!
- 15. Contact Information Contact me at timrobertson@robertsonadvisorsgroup.com 619-403-6622 Initial information can also be completed on my website: www.RobertsonAdvisorsGroup.com