The Cost Segregation Process
Cost Segregation – A Tax Reduction Strategy
Cost Segregation Advisors, LLCDavid C. Shaver, CEO
I am going to share information with you
that…• can enhance the cash flow for
property owners• can reduce the income tax burden
for property owners• almost all large companies are
aware of AND use• is utilized less than 10% of the
time due to a lack of awareness
ARE YOU OVERPAYING YOUR
INCOME TAXES?
What is Cost Segregation?
• A tax strategy• Based on a detailed cost analysis
– Using blueprints and construction cost data
– For new or existing commercial buildings– Leasehold improvements also qualify
• Maximizes your depreciation expense• Available to all commercial property
owners and many lessees
What properties qualify?• Apartment Complexes & Office Buildings• Day Care Facilities & Doctors’ Offices• Restaurants, Retail Stores, & Rental Homes• Auto Dealerships & Manufacturing Facilities• Self-Storage Facilities & Shopping Centers• Warehouses & Distribution Centers• Assisted Living & Skilled Nursing Facilities• Golf Courses, Hotels, & Private Airports
ALL COMMERCIAL PROPERTIES
How Much Can I Save?
• Certain clients have received after tax savings exceeding 15% of project costs, exclusive of land
• Clients after tax savings are often 2% to 8% of project costs, exclusive of land
• Most clients receive after tax savings ranging from $50,000 to $500,000
• Our largest after tax saving: $1,500,000 +• Our smallest after tax saving: $10,000 +
How much does Cost Segregation cost?
• If no savings are identified, no fee will be charged
• The cost is a fraction of the savings identified
• Fees usually fall between 5% and 15% of the clients after tax savings
Legal History
• 1997 case (# 109 T.C.21) involving the Hospital Corporation of America– IRS demanded $800,000,000– HCA defeated the IRS in court– Set precedent that positively affects ALL
commercial property owners• Walgreen’s Drugstores case at district level
– Guidelines allow carry back to all buildings built, bought, enlarged or remodeled since 1986
The Cost Segregation
Process: A Timeline
Initial Client Contact
• Initial Evaluation: Is it appropriate?• Time Required: 15 minutes - phone
call or meeting• Fee: NONE
Estimate Benefit Available
• Determine initial estimate of benefit and related fee
• Time Required: Minimal - provide detailed budget or AIA 702/703
• Fee: NONE
Initiate Cost Segregation Study
• Execute engagement letter• Provide plans, specifications, cost
records, etc.• Time Required: Minimal• Fee: Remit retainer – 50% of fee
Site Visit and Tour
• Complete a site visit and tour, take photos, etc.
• Make onsite notes, ask onsite questions
• Time Required: Depends on size of facility
• Fee: NONE
Complete Cost Segregation Study
• Complete analysis and classification of project costs
• Investigate and resolve questions and open items
• Finalize analysis and complete calculations• Prepare and finalize cost segregation report• Deliver report to client or client
representative• Fee: Balance of fee due at report delivery
AIA 702/703
Some of our Successes
Additional Potential Benefits
• Additional tax benefits can be created when segregated assets qualify under other tax code provisions:
• Section 179 “Expensing Election” and “Bonus Depreciation”
• The three slides that follow display the potential benefit of these additional tax provisions.
Why wait?
• Contact Cost Segregation Advisors, LLC to learn how you can increase your cash flow & reduce your tax burden
• You have nothing to lose, but much to gain
678.570.4699www.costsegadv.com