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

david@costsegadv.com