U.S. Treasury Department Circular 230 Disclosure:
In accordance with applicable professional regulations, please understand that, unless specifically stated otherwise, any written advice contained in, forwarded with, or attached to this communication is not a tax opinion and is not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding any penalties that may be imposed under the Internal Revenue code or applicable state or local law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

ANY STATEMENTS REGARDING FEDERAL TAX LAW CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSES OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW OR TO MARKET ANY ENTITY, INVESTMENT PLAN OR ARRANGEMENT.

Examples of typical percentages of the property basis that can be reclassified from standard straight line depreciation recovery periods of 39 year year life to accelerated recovery periods of 15 years, 7 years, and 5 years  -

Self Storage Facilities       20% - 70%

Industrial / Heavy Manufacturing
Processing Plants                   30% - 60%

Computer / Technology Centers / R&D       20% - 60%

Auto Dealerships        25% - 50%


Restaurants / Apartments / Multi-family      20% - 50%
Medical / Office Buildings / Hotels
Theaters / Grocery & Retail Stores
Banks / Assisted Living

Tenant Leaseholder Improvements      15% - 50%

Shopping Malls                      15% - 30%

Warehouses                            5% - 30%

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* A CSS study is a factually intensive analysis of properties and depreciation asset classifications, using applicable statutes, regulations, IRS pronouncements and judicial precedents.  There are a multitude of factors determining each study. This being the case, each study is unique and cannot be used to determine the outcome of any other study.

The typical cost "examples" are available to the public, from numerous sources, and are based on the the experience of multiple firms, who have performed studies for several years, and for diverse property types.  Your Cost Segregation Study will be unique.
Cost Segregation Studies - Savings Examples
The value of a CSS is based upon the time value of money.
 
The final depreciation deductions are the same whether a CSS is performed or not.  However, a dollar today is worth more than a dollar received thirty years from now.

 
An example of the value of a CSS can be seen from the following example.

Assume the following:

  • The property has twenty-five years left in its thirty-nine year depreciation period.

  • A CSS finds $100,000 in additional depreciation.

  • The property owner has a top federal and state marginal tax rate of 40%.

The value of the CSS, factoring in the time value of money, is $22,335.

The CSS results in a tax savings of $40,000 ($100,000 X 40%), 

If a CSS is not used, the $40,000 will be realized over the next twenty-five years in annual installments of $1,600 ($40,000/25). 

The present value of $1,600 a year over the next twenty-five years, payable annually at the end of each year, assuming a discount rate of 7.5%, equals $22,335. 
Affordability?
Affordability will be answered by a free savings analysis, which will project the tax savings and the cost of the study, as well as your increased cash flows and net present value savings.  Rest assured that our fees are highly competitive when compared to equivalent expertise and quality of work.  Typically, the cost for the study is a small, reasonable percentage of the increased cash flows—easily putting the affordability question to rest.  It is important to note that this is a professional service that relies on tax expertise. We offer fixed fees that are a product of the project type, level of difficulty, time, and expenses required for an IRS compliant study  that will save taxes, withstand review, and allow us all to sleep soundly.  If variable costs expenses are anticipated, these will be included in the service agreement.
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