A cost segregation study will identify items that can be properly classified as tangible personal property or land improvements, rather than real property that is depreciated over 39 years.

1. Richard Geib
rgeib@rfcrelief.com
941-840-1069

2. Goals of this Presentation:
To provide an Understanding
Of
Cost Segregation
And
It‘s Benefits
Tax Solutions & Relief

3. What is Cost Segregation?
Cost Segregation Is:
The IRS approved method of reclassifying building
components for Commercial and Residential Rental
properties resulting in substantial tax savings for the
property owner.
Tax Solutions & Relief

4. The US Treasury Department States:
“Cost Segregation is a lucrative tax strategy
that should be used in almost every major
purchase of Commercial Real Estate.”
Tax Solutions & Relief

5. Cost Segregation Defined:
A cost segregation study is an in‐depth analysis of the
cost incurred to build, acquire or renovate a real estate
holding.
The primary goal is to identify all construction related
costs that qualify for accelerated income tax
depreciation.
A true engineering based cost segregation study will
identify and assign costs to all building components
including those in the long life 39 year depreciation
category.
Tax Solutions & Relief

6. Cost Segregation Breakdown
Before After Class
5 Years S1245
Personal Property
200%DB
Double Declining
7 Years Balance Method
39 years* Segregate
15 years Land Improvements
150% DB
39 years* S1250 Real Property
Straight Line
* 39 Years for Commercial Property and/or
27.5 Years for Residential Rental Property
Tax Solutions & Relief

7. Types of Components We Segregate
and Reclassify In Our Studies:
T
• Communication Systems • Waste Interceptors • Fencing
a • Transformers • Security Access & • Specific-Use Structures
x • Hospitality Fixtures Monitoring Systems Foundations
• TV Outlets & Wiring • Conduit / Wiring to • Mezzanines
S
o • Distribution Panels Special Systems • Stairs
l • Distribution Wiring • Flex Space • Platforms
u • High Voltage Switchgear • Demountable Power • Structural Steel
t
• Data Jacks Systems • Task Lighting
i
o • Miscellaneous Outlets • Shower / Deluge Fixtures, • Vents
n • Emergency Power Supply & Waste • Beams
s • Computer Data / Power • Specialty Gas / • Columns
&
• Supply / Exhaust – Compressed Air Systems • Gas, Vacuum,
Kitchens • Millwork Compressed
R • Removable HVAC • Floor Coverings • Exhaust Systems
e Systems • Window Treatments • Audio / Visual Systems
l
• Environ. Control – • Wall Coverings • Buss Ducts
i
e Computer • Demountable Walls • Neutralization Basins
f • Environ. Control – • Decorative Lighting • Humidity / Temp. Control
Communications • Signage • Site Utilities
• Specialized Fire • Sidewalk & Curbing • Sewer & Drainage
Protection Systems • Parking Lots & Curbing Systems
• Specialized Air Filtration / • Site Utilities • Outdoor Lighting
“Our engineers look beyond the obvious items and evaluate every single key
component associated with a property.”

8. How Can I Benefit From Cost Segregation?
If you own commercial and/or residential rental property cost
segregation can provide significant tax benefits by utilizing
shorter depreciation recovery periods.
By following IRS guidelines for Engineering-based Cost
Segregation our engineers are able to reclassify assets
classified as 1250 long-life property to the more rapidly
depreciating 1245 property and land improvements.
This reclassification results in substantial cash flow benefits in
both current and future years through substantially shorter
depreciable tax lives and accelerated depreciation methods.
Tax Solutions & Relief

9. Let’s Look at an Example:
A commercial real estate owner purchases a
Mixed Use property for $2.5M.
Land, which is not depreciable, must be subtracted from the Purchase Price.
In this case we will subtract 20% or $500,000 for Land.
What is being depreciated each year Without Cost Segregation?
$2 Million / 39 Years
$51,282
The tax benefit for someone paying
35% Federal and 5% State taxes would be:
$20,513
Tax Solutions & Relief

10. How can you as the property owner find out how
much Tax Savings you can benefit from this?
It’s as easy four simple steps!
The Property Owner Fills out a Pre-Qualification Form
And Provides:
Depreciation Schedule – If Applicable
Closing Statement – If Available
Recent Appraisal – If Available
Tax Solutions & Relief

11. Tax Savings & Relief Provides Cost / Benefit Analysis:
Your Mixed Use building cost basis (not including land) is $2,000,000
and was put into service in 2009. The expected benefit range is:
TABLE OF BENEFITS
Expected Cash
Tax Year Additional Depreciation
Benefit
2009 $53,872 to $67,333 $21,549 to $26,933
2010 $86,244 to $108,067 $34,497 to $43,227
2011 $51,634 to $65,207 $20,653 to $26,083
2012 $30,476 to $38,931 $12,190 to $15,572
2013 $29,398 to $37,391 $11,759 to $14,956
2014 $13,442 to $17,559 $5,377 to $7,023
Total yrs 1-6 $265,064 to $334,487 $106,025 to $133,795
PROFESSIONAL FEES & ROI
Item Charges & ROI
Total Professional Fees $10,000
NET After Tax Fees $6,000
Anticipated ROI 17.7 : 1 to 22.3 : 1
Tax Solutions & Relief

12. Cost Segregation Results
BEFORE AFTER
16% 0% 5 Year
10%
39 Year 7 Year
74%
100%
Additional Depreciation: Actual vs. Estimate
Tax Year Estimate Actual
2009 $ 53,872 to $ 64,646 $67,333
2010 $ 86,244 to $103,493 $108,067
2011 $ 51,634 to $ 61,961 $65,207
2012 $ 30,476 to $ 36,571 $38,931
2013 $ 29,398 to $ 35,278 $37,391 Additional Tax Savings
2014 $ 13,442 to $ 16,130 $17,559
$133,795
Total thru
$265,066 to $318,078 $334,487
2014

13. Savings Graph:
$180,000
$160,000
$140,000
What could you do
$120,000
with an additional
$133,795 over the
$100,000
next six years?
$80,000
$60,000
$40,000
$20,000
$0
2013
2025
2011
2047
2027
2031
2037
2043
2009
2033
2015
2023
2045
2029
2035
2039
2019
2017
2021
2041

14. It Seems Too Good to be TRUE!
Will it raise Red Flags and Cause an Audit? NO!
Engineer Performed Cost Segregation is the IRS recommended
and preferred method for conducting Cost Segregation. Visit the
www.irs.gov website and search Cost Segregation and you will see
it is a normal and standard procedure.
Cost Segregation is Recommended By:
AICPA – American Institute of Certified Public Accountants
IRS – Internal Revenue Service
US Treasury Department
We support our findings at no additional charge to our clients.
Tax Solutions & Relief

15. Why Hasn’t My CPA Told Me About This?
Most CPA Firms do not have the Engineers on staff to
Perform Cost Segregation Studies.
Cost Segregation is a specialty service in which the Engineers
Must Know how to read and dissect Architectural and Engineering
Drawings, know the Tax Law associated with Building
Components, and know what to Look For and Document while
Physically Inspecting each and every Property.
We work with CPA’s every day to provide the Engineering Resources
and Documentation Necessary so they can provide this Valuable
Service to their Clients.
Tax Solutions & Relief

16. Cost Segregation Requirements:
Does the building have an adjusted cost
basis of $750,000 or greater?
Does the owner operate as a For‐Profit
Entity and pay Federal income taxes?
Does the owner plan to hold the property
for one year or longer?
Tax Solutions & Relief

17. No Cost, No Obligation
Cost-Benefit Analysis
We provide a free Cost-Benefit Analysis for each and every property.
In the analysis we will provide our flat fee to complete the study
along with a conservative estimate of benefits.
This provides the owner the ability to make an educated decision
whether or not to go forward with the study based upon the
anticipated return on investment.
Tax Solutions & Relief

18. It Is Really Your Choice:
You Can
OR
$PAY$ the:
IRS Yourself
Why provide the Federal Government with an Interest
Free Loan for the remaining 39 years of your
buildings’ depreciable life?
Tax Solutions & Relief

19. Tax Solutions & Relief
Please Contact us today for
Your Free Cost-Benefit Analysis!
Richard Geib
941-840-1069
rgeib@rfcrelief.com