Cost Segregation Studies

Miller Grossbard & Associates? engineering-based Cost Segregation Studies identify the cost that should be characterized as tangible personal property or land improvements. Such studies allow more rapid depreciation of real estate investments and provide a present value benefit from increased tax deductions in the early years of ownership. The amount of the benefit depends upon the taxpayer?s tax rate and the difference between the taxpayer?s return on capital and cost of capital.

Cost Segregation Studies can be conducted for:

• newly constructed facilities
• purchased facilities
• existing buildings undergoing renovation, restoration or expansion
• major tenant leasehold improvements
• retroactive cost segregation - post-1986 real estate construction, building acquisitions or improvements where no cost segregation study was performed (even though the statute of limitations may be closed on the property construction/acquisition year)

From our experience, we have seen Cost Segregation Studies identify shorter lived assets. These assets as a percentage of the investment in the building and improvements usually fall in the following ranges:

• Office buildings 5% to 15%
• Strip centers 5% to 15%
• Apartment buildings 10% to 20%
• Senior living facilities 15% to 25%
• Specialty retail 15% to 30%
• Manufacturing 20% to 60%
• R&D facilities 30% to 60%

For an owner who intends to hold real estate for the long-term, the present value of the increased depreciation is significant. For the short-term investor, a Cost Segregation Study should enhance cash flow in the early years of ownership by virtue of more rapid tax depreciation, thereby reducing the investor?s cumulative investment.

Almost every business can benefit from a Cost Segregation Study. Based on our experience in conducting Cost Segregation Studies, our engineering staff can objectively estimate whether such an analysis will be advantageous for your business.