cost segregation presentation
DESCRIPTION
A brief summary of how a cost segregation study can benefit a property and or business owner.TRANSCRIPT
Cost Segregation – Maximizing Tax Savings
Gil Mitchell – Director WTAS LLC
100 First Street, Suite 1600, San Francisco, CA [email protected]
(Tel) 415.764.2750, (Fax) 415.764.2770www.wtas.com
West Region Leader
Gil Mitchell, ASA – San Francisco– Has 25 years experience in :
• Cost Segregation, Property Tax Consulting, Machinery Appraisal and Real Estate Appraisal
– ASA in Machinery and Equipment Appraisal
– Certified General Real Estate Appraiser AG005951
– Formerly with:• Arthur Andersen, Grant Thornton, Moss Adams and Oregon
Department of Revenue
Gil’s Contact information:
• (Tel) 415.764.2750, (Fax) 415.764.2770
Jack Young, GPPA, CPA
– Experience in:• Financial Analysis
• Income Tax Consulting
• Machinery and Real Estate Appraisal
– USPAP appraiser of Machinery and Equipment
– Certified Public Accountant
– Formerly with:• KPMG
• Price Kong, CPAs
• Bar None Auction
• West Auction
Jack Young contact information(530) 219-7900 [email protected] www.norcalvaluation.com
Tax Deferral Strategy Analysis of project costs for constructed or purchased buildings & improvements Segregation of costs into “Personal Property” and “Real Property”A Means of Accelerating Depreciation Expense for Building Owner
•"A nickel isn't worth a dime today."
What Is Cost Segregation?
How Does Cost Segregation Work?
• Cost Segregation analyzes project costs to identify personal property (an Investment Tax Credit Standard) within and without of the structure.
The IRS has established asset classes "1250 & 1245" and depreciable lives for constructed properties– 27.5 years – Residential 1250
– 39 years – Commercial/Industrial 1250
Classes with shorter lives
– 15 years – Site Improvements 1250
– 7 years – Trade Fixtures 1245
– 5 years – Trade Fixtures 1245
Depreciation Lives Under Current Tax Law (MACRS)
New ConstructionPurchased FacilitiesRemodelsRenovationsExpansionsLeasehold ImprovementsEstates (Change in Basis)
What Kinds of Projects Benefit?
Can A Study Be Performed Retroactively?
• Yes!
Depreciation is considered a method of accounting. A study that “looks back” to prior tax years and results in a depreciation adjustment is an IRC 481(a) adjustment and is deducted over one year. Prior returns are not amended. We can go back to 1987.
Target industries: ANY INCOME PRODUCING PROPERTY: facilities such as manufacturing, industrial, research labs, financial institutions, office buildings, hotels, retail stores and shopping centers
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Apartments
Assited Living
Auto Dealers
Banks
Golf Course
Grocery Stores
Health Club
Hotels
Manufacturing
Offices
Restaurants
Retail
Warehouse
Wineries
Cost Segregation ServicesTypical Reclassification Percentage by Industry
Increased Cash Flow No Obligation Proposals We Estimate the Benefits in Advance A “Complete Depreciation Solution” for
Clients Buying/Developing Real Estate Documentation Minimize property taxes Proceeds can be used for debt repayment,
reinvestment, capital repairs, or other acquisitions
Benefits to Client
Manufacturing Facility - Tenant Improvement Analysis
Project cost = 1,671,450
Date place in service = 2002
Amount moved out of 39 year life to 5, 7 & 15 year lives = $1,379,000
1st year benefit with 30% bonus depreciation = $215,000
Office Building - Retroactive study
Purchase price = $2,794,000Date place in service = 1996Amount moved out of 39 year life to 5, 7 & 15 year lives = $445,0001st year increased depreciation = $266,2001st year benefit with change of accounting = $93,170
Summary
A Value-Added Service to Our Clients
Easy to Explain - Compelling Benefits
Documented Support for Our Client
Written Marketing Materials
No Obligation Proposals
Next Step: No Obligation Proposal
What we need:• Depreciation schedule for purchased property
• Contractors cost breakdown for new construction
Your proposal will include:Documents suitable to take to your tax advisor.
• Estimated cost allocation of short lived items.
• Estimated tax savings
• Appraisal fee proposal
Brainstorming:
What specific clients or properties would benefit from a
Cost Segregation Study:
• Office buildings
• Wineries
• Apartments
• Shopping centers
• Retail
• Restaurants
• Grocery Stores
• Manufacturing
Questions?