Consultants launch practice to save owners on depreciation taxes

Real Estate Weekly, March 28, 2001

Landmark tax case creates new opportunities for owners to save

Cost Segregation Consultants, LLC has launched a national service practice dedicated exclusively to identifying and securing tax savings for property owners through a new, complex and underutilized property classification technique. Cost Segregation Consultants capitalizes on a recent court decision that clears the way for significant up-front tax savings for owners of commercial and residential real estate, as well as tenants who have made substantial improvements to their occupied space.

Backed by Anchin, Block & Anchin LLP (ABA), one of the largest and most highly respected accounting and consulting firms in the nation, Cost Segregation Consultants helps owners realize significant tax savings -- often in the $100,000s, and at times, millions of dollars.

As the result of a 1997 tax case and 1999 IRS legal memoranda, certain portions of commercial and residential properties can be depreciated over shorter periods than the buildings themselves, providing accelerated tax deductions.

"We have helped owners of retail, office, hotel, industrial and multi-family properties around the country realize millions of dollars in savings via our cost segregation and accounting expertise," said Marc Wieder, CPA, Managing Director of Cost Segregation Consultants. "The value of this specialty cannot be underestimated, nor fully achieved without specific knowledge, experience and expertise. We are proud to offer this service at the highest level to owners of all types of property that might benefit from review, analysis and action."

Through the preparation of specialized cost segregation studies prepared by qualified engineers/appraisers, Cost Segregation Consultants, shows owners of multi-family rental, office, shopping center/retail, manufacturing and healthcare/nursing home facilities how to expense these assets over 5-, 7- and 15-year periods -- far shorter than the current 27.5- and 39-year lives currently applicable to the buildings themselves.

Land improvements such as parking lot paving, sidewalks and curbing, exterior lighting, swimming pools, tennis and basketball court, playgrounds, landscaping and site improvements such as ponds and fountains, signs and fencing are eligible for 15-year depreciation.

Furnishings, fixtures and equipment such as office and clubhouse furniture, indoor sports courts, fire extinguishers, emergency lighting, alarms, antenna systems and floor molding are eligible for 7-year depreciation. Other items such as appliances, carpeting, vinyl tiles, counters, cabinets, smoke detectors, shelving and window treatments are eligible for an even shorter 5-year depreciation.

The up-front savings can be substantial, and the experts at Cost Segregation Consultants can provide an immediate evaluation of potential tax reductions. For example, only properties acquired after 1986 are eligible under the IRS ruling, and owners who plan on disposing of their properties in the short-term will not benefit, as the savings are based solely on the time value of money and the benefit could be re-captured upon sale.

"If you acquired property or made substantial improvements after 1986, we can assist you in evaluating your savings," said Mr. Wieder. "A visual inspection will also uncover additional items that may be reclassified to depreciate over a shorter period."

Cost Segregation Consultants recently saved the owner of a 24-property residential portfolio over $9 million on a building cost of $164 million. Owners of a New York City shopping center with a $13 million building cost recently saved $837,000 after their cost segregation study was implemented and applied, an over 9%. savings.

"Your first step is to evaluate whether your properties fit this profile, and whether this accelerated depreciation will help offset any generated income," said Howard Gewirtz, CPA, Managing Director of Cost Segregation Consultants.