3. 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
5. Obtain Information – Invoice
Approach
Cost of construction – AIA/Developer documents/drawings
Land allocation
Date of construction / acquisition
Soft cost details
Tax depreciation schedule
6. 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
7. 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
8. Obtain Information – Engineering
Approach
Obtain closing documents
Site survey
Building plans
Tax depreciation schedules
Collect any drawings or other substantiating documents
9. 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
10. 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
11. Component Cost Analysis
Isolate property
components –
building vs. structural
Determine
component costs
Allocate soft /
indirect costs
13. Our Report to the Owner
Summary
Prepare Tax Prepare Prepare
Statement of
Depreciation Cash Flow NPV
Additional
Summary Analysis Analysis
Cash Flows
14. Recap of Cost Segregation
Benefits
Improve
Return on
Reduce
Investment
Ad
(ROI)
valorem
Taxes
Improve Maximize
Tax Rates Tax
on Sale of Deferrals
Property
Increase
Reduce Cash
Funding Flow