Cost Segregation

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Benefits of Cost Segregation

Rapid Depreciation

Decreased Tax Burden

Increased Cash Flow

Reduced Funding

Actual Cost Segregation Study

$6 Million Manufacturing Plant

Standard 1st 7 Years Depreciation: $1m

After Cost Segregation 1st 7 Yrs:$2.3m

After-Tax 1st 7 Yrs Cash Flow: +$500,000

Cost Study ROI greater than 100 fold

Qualifying Properties

Acquired/Constructed after 1986

Acquisition cost >$1 million

Costs not segregated prior

Substantial remaining basis

Obtain Information – Invoice

Approach

Cost of construction – AIA/Developer documents/drawings

Land allocation

Date of construction / acquisition

Soft cost details

Tax depreciation schedule

Invoice Methodology

Interviews with Appropriate Parties

Use of Common Nomenclature

Use of Standard Numbering System

Explanation of the Legal Analysis

Determination of Unit Costs and Engineering “Take Offs”

Organization of Assets into Lists, Groups, or Divisions

Reconciliation of the Total Allocated Costs to the Actual Costs

Explanation of the Treatment of Indirect Costs

Invoice Methodology

Identification and Listing of Section 1245 Property

Narrative Report

Schedule of Assets

Schedule of Direct and Indirect Costs

Schedule of Property Units and Costs (If any)

Statement of Assumptions and Limiting Conditions

Exhibits

Obtain Information – Engineering

Approach

Obtain closing documents

Site survey

Building plans

Tax depreciation schedules

Collect any drawings or other substantiating documents

Engineering Methodology

Includes all of the Invoice Methodology

with the addition of:

Site Survey by Engineers

Facility and Drawings recreated by

Engineers

Take-offs generated

Estimates created with recognized sources

such as RS Means

Costs prorated to acquisition cost

Reconcile Costs

Reconcile closing documents or construction costs to balance sheet / tax depreciation accounts

Determine capitalized soft / indirect costs

Determine unit costs

Apply unit costs to actual

Component Cost Analysis

Isolate property components –

building vs. structural

Determine component costs

Allocate soft / indirect costs

Form 3115

Allocate segregated costs to tax depreciation assets

Prepare attachments to form 3115

Prepare form 3115

Our Report to the Owner

Prepare Tax Depreciation

Summary

Prepare Cash Flow Analysis

Prepare NPV

Analysis

Summary Statement of

Additional Cash Flows

Recap of Cost Segregation

Benefits

Improve Return on

Investment (ROI)

Maximize Tax

Deferrals

Increase Cash Flow

Reduce Funding

Improve Tax Rates on Sale of Property

Reduce Ad

valorem Taxes

Cost Segregation

www.TurnerFinancialConsultants.com