the value of cost segregation
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Cost Segregation
www.TurnerFinancialConsultants.com
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
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