MAXIMIZING CASH FLOW

Overview and Benefits of Cost

Segregation and 179D Certifications

Agenda20 Minute Presentation

Overview of Cost Segregation

How it can benefit your clients

Representative properties

Overview of the 179D Certification

Qualifying property types

Engineering process

10 Minutes for Questions and Answers

Total time =30 minutes

What is Cost Segregation?

IRS approved tax deferral

strategy

Allows commercial property

owners to accelerate

depreciation on building

components and personal

property assets

Owners report higher expenses

thus lowering their tax liability

= INCREASED CASH FLOW

Depreciation Without

Cost Segregation

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

2006 2007 2008 2009 2010

39 Year Straight Line Depreciation

Before and After Cost

Segregation

Catch-Up Depreciation on an Older Property with

a §481(a) adj

§481(a) adj. = $1,085,359

.

Positive “Catch-Up” Taken

Immediately

Tax Savings

Depends on: Age of building i.e. “placed in-service” date

Type of building and improvements (facts and

circumstances)

On average, every $100,000 of 39-year property reclassified

to 7 or 5 year property generates approximately $20,000*

in tax savings.*Represents the 10 year net present value of cash (NPV) over 39 years using a 6% discount rate

How Does it Benefit Your Clients?

Before

Cost Segregation

Most property assets classified at 39 years

Small amount of deduction taken yearly over life of building = tax liability spread out=PAYING IRS MORE

After

Cost Segregation

Property assets reclassified at 5, 7 and 15 years

Large amount of property deductions taken at front of the life of the property = lower tax liability =CASH FLOW

Rescheduled

$372,708

(43.7%) of

assets to

shorter life

$853,595 Dental Facility

* Represents the 10 year net present value savings (NPV) using a 6%

discount rate

Rescheduled

$1.3 million

(19.4%) of

assets to

shorter life

$6,781,712 Office Building

*Represents the 10 year net present value savings (NPV) using a

6% discount rate

Rescheduled

$930,925

(59.3%) of

assets to

shorter life

$1,570,222 Fast Food Restaurant

* Represents the 10 year net present value savings (NPV) using a 6%

discount rate

Six Step Process

1. Estimate of benefits

2. Evaluation of property

3. Acceptance of proposal

4. Engineer’s site visit

5. Engineer’s review and classification

6. Review and acceptance of cost segregation study

What is a 179D Certification?

Related to the design and

construction of energy efficient

commercial buildings.

Owners can take a one time

deduction rather than spreading

out the depreciation over as many as

39 years.

Architects and engineers who

design municipal or not for profit

buildings can also qualify.

Who Can Benefit From the 179D

Certification?

Commercial owners who have performed renovations to

their building since December 31, 2005.

To qualify the building needs to be:

1. A commercial building of any size

2. Apartment for lease, four stories or more

3. A commercial building that has undergone energy

renovations

Properties certified in the 60,000-120,000 square foot range

can potentially generate benefits of $100,000 to $200,000 per

building.

What Building Areas Qualify ?

Energy efficient improvements can be made in the following

areas:

Interior Lighting

HVAC/ System Hot Water

Building Envelope

Both Full and Partial

Deductions are Available

Engineering Process

Professionally licensed throughout

the Southeast.

Perform site visit for a detailed

analysis of the interior lighting,

HVAC/SHW and the building

envelope.

Utilize Department of Energy’s

software to determine if building’s

energy efficient improvements meet

tax code requirements.

Prepare the FTD (Federal Tax

Deduction) certificate package and

other necessary documents.

Questions and Answers

For More Information Visit Our Web Site at:

www.rbengineering.com

© 2011. RB Engineering, Inc. All rights reserved.

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is distributed with the understanding that RB Engineering, Inc. is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax

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and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.