1. Keep more of what you earn THE BENEFITS OF COST SEGREGRATION
PREPARED BY:
Brian Gilboy
June 14, 2016

2. AGENDA Background on cost segregation Who can benefit from a study
How studies are performed
Assets types/examples
Case Study
Questions
June 14, 2016 – Benefits of Cost Segregation

3. BACKGROUND Tax strategy utilized by commercial property owners
Accelerates traditional 39 year property to shorter lives
Reclassifying assets from real property to personal property
Increases cash flow through tax deferment
1997 HCA v. Internal Revenue Service
In 2005 IRS publishes Audit Technique Guidelines
Accepted tax strategy supported by over 300 cases
June 14, 2016 – Benefits of Cost Segregation

4. THE BENEFITS Owners/ investors of commercial property
Reduce tax liability-increase cash flow
Buildings placed in service since 1987
“Catch up” on missed depreciation without amending
50% Bonus depreciation for new construction
Support for writing off disposed assets
June 14, 2016 – Benefits of Cost Segregation

5. THE BENEFITS Typical candidates for a study?
All commercial buildings ($500,000+)
New construction
Purchase of existing building
Step up in basis
Inheritance/change of ownership
Major renovation
June 14, 2016 – Benefits of Cost Segregation

6. It is common to reclassify 20%-40% of the building’s cost from 39 years to shorter useful lives.

7. METHODOLOGY Different methods of cost segregation
Detailed engineering approach
Residual/estimate
Rule of thumb
Site visit scheduled, plans reviewed, reconstructed
Separate building assets and business related assets
Allocate costs using actual costs or IRS database
Important to also capture 39 year property
June 14, 2016 – Benefits of Cost Segregation

8. SAMPLE PAGE
June 14, 2016 – Benefits of Cost Segregation

9. ELECTRICAL 39 Year Property 5/7 Year Property
June 14, 2016 – Benefits of Cost Segregation

10. PLUMBING 5/7 Year Property 39 Year Property
June 14, 2016 – Benefits of Cost Segregation

11. MECHANICAL/ HVAC 39 Year Property 5/7 Year Property
June 14, 2016 – Benefits of Cost Segregation

12. SITE IMPROVEMENTS 15 Year Property
June 14, 2016 – Benefits of Cost Segregation

13. INTERIORS Light fixtures Carpeting Wall covering Specialty flooring
Decorative millwork
Molding
Partition walls
Shelving
Cabinetry
Branch wiring
June 14, 2016 – Benefits of Cost Segregation

14. CASE STUDY New construction of $5.2M manufacturing facility
Placed in service in December of 2015
Conducted a detailed engineering study
Took advantage of bonus depreciation
Reclassified 33% of the construction costs to 5/7/15
June 14, 2016 – Benefits of Cost Segregation

15. CASE STUDY
Client will accelerate an additional $1.4M v. traditional 39 year classification in the next 5 years
June 14, 2016 – Benefits of Cost Segregation

16. SUMMARY New & existing commercial properties and major renovations
Catch up on missed depreciation to current year without amending returns
Recommend a detailed engineering approach
Offer free assessments to determine benefits
Contact your CDH trusted advisor
June 14, 2016 – Benefits of Cost Segregation

17. Thank you brian@bearingstrategies.com 847-550-7101
THE BENEFITS OF COST SEGREGRATION