COST SEGREGATION TAX-SAVING STUDY

EXPERIENCE

We’ve provided numerous clients with cost segregation studies, which have resulted in considerable tax savings while complying with IRS rulings on the subject.

PASSION

Our team is passionate about providing high-quality services and proactive advice to help you reduce taxes and increase profits.

KNOWLEDGE

Our cost segregation process identifies and segregates shorter-lived assets to allow for faster depreciation and decreased taxable income.

Lower your taxes!

Increase your cash flow!

Maximize your real estate

investments!

NO RISK, NO OBLIGATIONWe’ll provide a no-cost, no-obligation consultation, including an estimate of present-value tax savings and fees.

You have nothing to lose by exploring cost segregation as a tax reduction strategy for your business — unless, of course, you like paying taxes!

Give us a call to schedule your free consultation.

Jerry Moss • 615-782-4279Mark Patterson • 615-346-2488David Lister • 615-346-2492

If your company has purchased, constructed or renovated a building (or plans to in the

future), KraftCPAs can help you get the maximum return on your investment. Our

comprehensive cost segregation service can maximize your tax savings and increase the cash

flow on your current or future real estate investments.

A well-designed cost segregation study can reclassify real estate assets to:

» accelerate your depreciation deductions

» reduce your property taxes

» lower your sales tax liability

Valuable tax savings are embedded in your buildings and are often overlooked by accountants not trained in cost segregation. Cost segregation specialists are trained to identify and segregate shorter-lived assets (those qualifying for 5-, 7-, or 10-year write-off periods) that are generally buried in a building’s construction or renovation costs (which are generally depreciated over 39 years). By reclassifying assets and accelerating their depreciation, we accelerate expense and decrease your taxable income. You pay less tax during the early stages of a property’s life. The present value of the tax savings can be tremendous.

Under certain circumstances, the assets identified may also qualify for the special 50 percent bonus depreciation.

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HOW DOES COST SEGREGATION WORK?

Could my building be a candidate?

What qualifies for cost segregation? » New buildings currently under construction » Existing buildings that you’re renovating, remodeling

or restoring » Expansions of existing buildings » Purchases of existing buildings » Office or facility leasehold improvements and “fit-outs”

What about older properties?The benefits of cost segregations are not limited to new construction. If you constructed, purchased or renovated a building after 1986, there are still opportunities to minimize your tax burden. Assets within existing properties constructed anytime, but placed in service after 1986, can be segregated.

Is cost segregation industry specific?No. While some industries’ shorter-lived assets are more readily apparent, most companies that own facilities (whether they be offices, warehouses, apartment buildings, manufacturing plants, etc.) can benefit from cost segregation — no matter what their industry. We have performed cost segregation studies for clients in various industries and professions with highly favorable results.

Does cost or value of the building matter?You might imagine that the bigger the building, the greater the potential for reclassifying assets; however, we have conducted studies on various types of buildings and real estate ranging from less than $1 million to more than $30 million. Even small facilities have realized tens of thousands of dollars in current-value tax savings. Cost segregation is not just for larger companies. Depending on its use, a relatively small property can be loaded with shorter-lived assets.

Can cost segregation reduce other taxes?In addition to reducing income tax liability by accelerating depreciation, you may be able to lower other tax costs, such as real estates taxes and sales taxes.

Reduce real estate taxesBy separating tangible personal property from the non-residential real property, you may be able to reduce real estate taxes. Even if a jurisdiction imposes a personal property tax on business property, you may reduce taxes due to substantially shorter personal property lives and faster devaluation of assets.

Benefit from sales tax exemptionsMany states provide a sales tax exemption to companies purchasing qualifying industrial machinery, equipment and supporting systems. As a result of a cost segregation study, you may find that you can classify certain assets (generally considered personal property) as industrial machinery or equipment, where you’ll get an immediate cash savings.

How much does a cost segregation study save?For every million dollars of property you reclassify for faster depreciation, the present value of your increased cash flow from income tax savings approximates $175,000.

How much does a cost segregation study cost?A cost segregation study is not an expense; it’s an investment. It’s our experience that the present value of the tax savings is generally six or more times the cost of our fee.

“The cost segregation study KraftCPAs did for us resulted in $93,000 of present value tax savings, of which $23,000 occurred the first year. The first-year savings alone more than paid for the fee. I highly recommend KraftCPAs’ cost segregation service. It’s a service that pays for itself.”

Charles Sprintz,Sprintz Furniture Real Estate

What our clients are saying . . .

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Visit www.kraftcpas.com to learn more.

Nashville, TN 615-242-7351

Columbia, TN 931-388-3711

Lebanon, TN 615-449-2334

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Jerry Moss, CPATax Member615-782-4279 jmoss@kraftcpas.com

Mark Patterson, CPATax Member615-346-2488 mpatterson@kraftcpas.com

Why should we use KraftCPAs?All CPAs are not equally qualified, particularly when it comes to a highly specialized tax service like cost segregation. Unlike some firms that will simply prepare a schedule for faster depreciation, KraftCPAs provides a comprehensive cost segregation service that is engineering based, fully documented, and in compliance with IRS rulings on the subject.

An engineering-based approachDuring a cost segregation study, our professionals will:

» physically inspect the property » examine architectural and engineering drawings and

specifications for potential asset reclassification » apportion direct labor and material costs, based on

engineering specifications, to shorter-lived assets, as applicable

» analyze cost data, including the contractor’s application of payments, change orders, owner-incurred costs, and indirect disbursements, to determine if they can be allocated to shorter-lived assets

» prepare an itemized list of assets qualified for shorter-life classifications based on relevant income tax authorities

Fully documented and in complianceA properly documented, third-party cost segregation study can help resolve IRS inquiries at the agent level, while improper documentation of cost and asset classification can lead to an unfavorable audit adjustment. With a KraftCPAs study, you’ll have the evidence you need to withstand IRS scrutiny because our procedures are based on IRS and judicial rulings. In addition, we create an “audit trail,” which ties the cost and classifications of assets to contract documents and other source data.

About Us

Differentiating FactorsFounded in 1958, KraftCPAs is one of Tennessee’s largest independent CPA and consulting firms. We have a total staff of more than 190 and seven affiliated companies providing a wide range of compliance and consulting services.

KraftCPAs was selected as one of The 10 Most DependableTM Accounting Firms in the Southeast, a list published in FORTUNE magazine and based on research by Goldline Research.

Team Leaders

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David Lister, CPATax Member615-346-2492 dlister@kraftcpas.com