Cost Segregation Study ProposalCost Segregation Study ProposalOverview AnalysisOverview Analysis

‘YOUR’ Company

Cost Segregation Studies Overview

Cost Segregation is an IRS-approved process of identifying personal property assets that often get buried or lumped together within the Real Property asset category. By undergoing a cost segregation study, these personal property assets are reclassified to the shortest possible depreciable life to enable the real estate owner to maximize his or her tax depreciation situation, thereby reducing the current income tax obligations. The tax savings generates cash flow that owners can use to reinvest in the business, purchase more property, apply to their principle payment or spend on themselves.

Cost Segregation Services, Inc. (CSSI), an independent third party, performs an engineered cost segregation study on your commercial property. Through the study CSSI engineers identify and reclassify segments of your real property into personal property. This allows you to accelerate the depreciation of your building and/or renovation into five-, seven- and 15-year categories rather than the conventional 27.5- and 39.5-year schedules. Five- and seven-year items include decorative building elements, electrical for dedicated computer equipment, and carpet. Fifteen-year items include site utilities, landscaping and paving.

What?

How?

CSSI Synopsis

We are engineers singularly focused on cost segregation. Our goal is to support you and your CPA with the most accurate results so you can realize maximum savings and increased cash flow.

Our engineering background allows us to provide not only the best possible results, but also strictly adheres to all IRS guidelines and recommendations. In addition, we constantly monitor changes to stay up to date on the most current IRS cost segregation rules and regulations.

CSSI is classified as an independent engineering specialist meeting the exact specifications stated by the IRS in regard to commercial property owners performing cost segregation studies.

Compliant IndependentFocused

CSSI is the premier engineering company providing cost segregation studies for U.S. businesses. We have completed over 6,000 studies nationally.

Property Analysis Summary

These Savings are based on an estimate of 10 locations.

    Total Analysis

             

     

Building Cost     $ 13,655,000    

             

Date Acquired          

             

Tax Year:   2010 2011 2013

             

Current Method          

             

Accumulated Depreciation Reported        

39 year straight line method   $ 1,171,982 $ 1,522,096 $ 2,222,324

             

Alternative Method        

             

Cost Segregation Study Accumulated Depreciation        

  5 Year     $ 1,800,234 $ 2,064,248 $ 2,306,909

  7 Year     $ - $ - $ -

  15 Year     $ 288,709 $ 359,869 $ 487,124

  39 Year     $ 883,031 $ 1,147,423 $ 1,676,207

  Total     $ 2,971,974 $ 3,571,540 $ 4,470,240

             

Results for Tax Year:   2010 2011 2013

Increased Accumulated Depreciation Expense   $ 1,799,992 $ 2,049,444 $ 2,247,916

Tax Rate (Estimated)   36% 36% 36%

Estimated Accumulated Tax Savings Benefit   $ 647,997 $ 737,800 $ 809,250

Property Economic Summary

YOUR Company

Property Name Purchase Date Cost Basis Estimated Cost Savings Benefit

Cumulative Benefit at End of Ownership

After Tax Fees

2010 2011 2013 NPV FV  

Building 1 1/1/07 $ 1,250,000 $ 62,000 $ 70,226 $ 72,917 $ 50,924 $ 813,170 $ 7,450

Building 2 7/1/10 $ 1,000,000 $ 12,483 $ 32,246 $ 50,710 $ 37,672 $ 757,791 $ 6,950

Building 3 6/1/06 $ 750,000 $ 45,761 $ 48,107 $ 47,058 $ 32,851 $ 485,719 $ 5,450

Building 4 9/1/04 $ 500,000 $ 32,022 $ 31,673 $ 30,973 $ 20,805 $ 263,721 $ 3,950

Building 5 3/1/08 $ 2,350,000 $ 101,510 $ 117,429 $ 139,662 $ 99,492 $ 1,715,794 $ 8,950

Building 6 8/1/08 $ 980,000 $ 46,133 $ 53,269 $ 63,253 $ 43,726 $ 754,084 $ 6,825

Building 7 4/1/07 $ 600,000 $ 32,133 $ 36,369 $ 37,826 $ 26,179 $ 418,027 $ 4,550

Building 8 5/1/09 $ 1,850,000 $ 58,971 $ 80,597 $ 105,302 $ 76,158 $ 1,418,456 $ 8,600

Building 9 11/1/02 $ 475,000 $ 29,947 $ 29,615 $ 28,951 $ 18,496 $ 201,006 $ 3,900

Building 10 12/1/06 $ 3,900,000 $ 227,036 $ 238,270 $ 232,598 $ 172,877 $ 2,556,052 $ 10,475

Totals   $ 13,655,000 $ 647,997 $ 737,800 $ 809,250 $ 579,180 $ 9,383,821 $ 67,100

Net Present Value Summary

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Individual NPV Breakdowns

Benefit Analysis at End of Ownership   Cumulative Net Present Value of Benefit $ 579,180 Cumulative Future Value of Invested Savings $ 9,383,821

Savings Overview

Estimated Accumulated Tax Savings Benefit2010 $ 647,997 2013 $ 809,250

Fees Overview

CSSI Fees: For all Properties - Before Tax $ 67,100 CSSI Fees: For all Properties - After Tax $ 42,944      

Discounted 10% CSSI Fees: For all Properties - Before Tax $ 60,390

Discounted 10% CSSI Fees: For all Properties - After Tax $ 38,650

Net Benefits to After Tax Cost Ratio (First Year of Implementation)

15:1

Net Present Value to After Tax Cost Ratio 13:1

NPV

Project application for Cost Segregation of YOUR Company Project application for Cost Segregation of YOUR Company commercial property facilitiescommercial property facilities

Study cost to include: Study cost to include: 1.1. All cost of travelAll cost of travel2.2. All related engineering costsAll related engineering costs3.3. Study to be provided for all buildings on propertyStudy to be provided for all buildings on property4.4. Study to be coordinated with YOUR Company Study to be coordinated with YOUR Company

project and accounting personnelproject and accounting personnel5.5. Completed cost segregation study document for Completed cost segregation study document for

ABC Company depreciation accounting ABC Company depreciation accounting applicationapplication

OverviewOverview

Cost Segregation Study TimelineCost Segregation Study Timeline

Cost Segregation Study in Progress… Start Date, Jan. 3, 2012------------Feb. 14, 2012

Completed Study Review, Feb. 7, 2012----------------------------------------Feb. 14, 2012

Initiate Site Visits & Collect Data for all Properties

Complete Engineering Analysis

Jan. 3, 2012Initiate Study Jan. 3 – Jan. 17

Feb. 7, 2012

Feb. 7 First Review Date of Draft

Review with Tax ConsultantsFeb. 14, 2012

Delivery of Completed Study

Initiate StudyInitiate Study

1.1. Agreement: Engagement letter approvalAgreement: Engagement letter approval

2.2. Review of project cost system with Project ManagementReview of project cost system with Project Management

3.3. Schedule Site Survey of completed projectsSchedule Site Survey of completed projects

4.4. Review cost information for each locationReview cost information for each location

5.5. Request and contact client coordinatorRequest and contact client coordinator

Site SurveySite Survey

1.1. Validate and review source information from client Validate and review source information from client coordinator for each locationcoordinator for each location

2.2. Complete site survey of all propertiesComplete site survey of all properties3.3. Review any changes made to project definition for projectReview any changes made to project definition for project4.4. Review planned completion timetableReview planned completion timetable5.5. Review accounting methods for asset definitionReview accounting methods for asset definition

Study ReviewStudy Review

1.1. Sample Report Project completedSample Report Project completed2.2. Review of completed cost detailReview of completed cost detail3.3. Review total site cost detailReview total site cost detail4.4. Review accounting methods for asset definitionReview accounting methods for asset definition5.5. Gather final data for completion of cost segregation studyGather final data for completion of cost segregation study

Cost Segregation Study ReportCost Segregation Study ReportFinal ReviewFinal Review Review Draft, Feb. 17, 2012Review Draft, Feb. 17, 2012

- Review completed draft Review completed draft - Include updated documentationInclude updated documentation- Review results with tax professionalsReview results with tax professionals

Final Report, Feb. 24, 2012Final Report, Feb. 24, 2012- Deliver cost segregation reportDeliver cost segregation report- Return any data and filesReturn any data and files

IRS Guideline: “For A Quality Study”IRS Guideline: “For A Quality Study”

1.1. Preparation By an Individual with Expertise and ExperiencePreparation By an Individual with Expertise and Experience2.2. Detailed Description of the MethodologyDetailed Description of the Methodology3.3. Use of Appropriate DocumentationUse of Appropriate Documentation4.4. Interviews Conducted with Appropriate PartiesInterviews Conducted with Appropriate Parties5.5. Use of Appropriate NomenclatureUse of Appropriate Nomenclature6.6. Use of a Standard Numbering SystemUse of a Standard Numbering System7.7. Explanation of Legal AnalysisExplanation of Legal Analysis8.8. Determination of Unit Costs And Engineering “Take-Offs”Determination of Unit Costs And Engineering “Take-Offs”9.9. Organization of Assets Into Lists or GroupsOrganization of Assets Into Lists or Groups10.10. Reconciliation of Total Allocated Costs to Total Actual CostsReconciliation of Total Allocated Costs to Total Actual Costs11.11. Explanation of the Treatment of Indirect CostsExplanation of the Treatment of Indirect Costs12.12. Identification And Listing Of Section 1245 PropertyIdentification And Listing Of Section 1245 Property13.13. Consideration Of Related Aspects (e.g. IRC Consideration Of Related Aspects (e.g. IRC §263A. Change in §263A. Change in

Accounting Method And Sampling of Techniques)Accounting Method And Sampling of Techniques)

CSSI Report: Outline of Contents CSSI Report: Outline of Contents Executive SummaryExecutive Summary The StudyThe Study Scope of StudyScope of Study

- OverviewOverview- MethodologyMethodology

Investigation and Evaluation CertificateInvestigation and Evaluation Certificate Engineer QualificationsEngineer Qualifications Cost SummaryCost Summary Cost DetailCost Detail Exhibits – Select photographs from site visit and Exhibits – Select photographs from site visit and

architectural drawings.architectural drawings.

For years, CSSI has been delivering quality, affordable, engineer-based

cost segregation studies to a wide range of individuals and businesses.

Our team of experts can help easily apply the results to your company

owned locations and work with you and your tax professional to assure

successful results. In addition, our national coverage and expertise allows

us to work with customers and properties across the United States.

Thomas M. ‘Tom’ LanahanThomas M. ‘Tom’ LanahanCSSI – National Sales ExecutiveCSSI – National Sales Executive

tomlanahan@att.nettomlanahan@att.net

(251) 583-4377(251) 583-4377