Cost Segregation Case Study

Cost Segregation Leads to Substantial Tax Savings and Retirement Income for Building Owners

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By simply reclassifying certain parts of their building as personal property, a cost segregation study allowed this couple to save nearly $300,000 in taxes over two years. These savings, in turn, could represent over $3.3 million in tax-free income for the couple between ages 65 and 100.

Cutting Tax Burden, Improving Cash Flow through Cost Segregation

This Phoenix couple was a match made in heaven. The husband is a very successful and renowned veterinarian. His wife is a trusted OB/GYN. They both run top-notch practices and make a good income. They are also fortunate enough to be their own landlords, purchasing and improving their buildings from 2004 through 2006 and again in 2010. The great news was that the years of hard work and education had paid off. The challenge was the significant tax liabilities they were faced with every quarter.

Challenges to Eliminating Tax Burden and Utilizing Tax Opportunities

•  Continuing to provide the best service in their respective industries with tightening budgets.
•  Eliminating tax burden and ensuring they can grow their practices by utilizing the monies elsewhere.
•  Utilizing tax opportunities through the buildings they currently own that have significantly declined in value.

Solutions & Capital Discovery®

A cost segregation study on the buildings owned by the couple allowed traditionally 39-year property (written off over 39 years) to be reclassified to either 5-year, 7-year or 15-year property based on a detailed, engineering-based analysis of the blueprints and asset usages. Certain parts of the building could actually be depreciated much faster based on IRS guidelines. The IRS has issued an Audit Technique Guide (ATG) for their field agents which spells out the process of a properly conducted cost segregation.  CRG follows this guide word for word. With hundreds of studies done over the years, not one has even been challenged by the IRS.

Based on the cost of the buildings and the improvements that were done, the couple saved nearly $300,000 in taxes over a 2-year period, fully eliminating their tax burden for two full years and part of another when they were historically paying well over $100,000 in taxes each year.

Utilizing these deductions enabled the veterinary clinic and the OB/GYN office to grow and to continue supporting the community by ensuring that people and their pets were well cared for.

Translating Tax Savings into Future Income

By applying their $300,000 tax savings from the cost segregation study toward a a life insurance retirement plan (LIRP), the couple could reap millions of dollars in future income after they retire. Based on properly leveraging IRS code, they may receive $94,884 of tax-free income per year from ages 65 to 100, for a possible total of $3,320,940. This serves as an example of how maximizing tax savings can help ensure financial security and tax diversification down the road.

Contact Capital Review Group to learn more about taking advantage of all tax incentives available.