As Sophisticated Lodging Professionals, you know the Tax Savings strategy and benefits of a Quality Cost Segregation Study. You know, and understand, that a Quality Cost Segregation Study looks at all Commercial Non-Residential 39-Year Property, and all Commercial Residential 27.5-Year Property, and reclassifies a percentage (%) of that Property away from long-lived 27.5 & 39-year Tax Depreciable Property to short-lived 5, 7 & 15-year Tax Depreciable Property.
You know the three major benefits of a Quality Cost Segregation Study:
1)You don’t know if we will own our Commercial Property in 27.5 or 39-years from now, but we know you own the Property today, so you want to maximize your Federal and State Income Tax Savings ($) today!
2)You would rather receive a larger Federal and State Income Tax Savings ($) today, when the Dollar ($) has the buying power of a Dollar ($), and not in the future, when the Dollar ($) is depreciated and eroded by inflation!
3)You want to take advantage of the Re-Investment Opportunity Horizon. The ability to reinvest, into your businesses, the Tax Savings ($) realized with the use of a Quality Cost Segregation Study, reinvesting those Dollars ($) into your business, employees, services and future real property improvements and acquisitions!
The problem with using a Cost Segregation Professional alone!
Cost Segregation Professionals, who do not have an Appraisal/Valuation back-ground, lack the knowledge, expertise and in many cases the state licensing need to properly value and allocate all acquired Property into their proper tax lives (5, 7, 15, 27.5 & 39-year). This inability to identify, classify, and value all short and long-lived property acquired in a Lodging Acquisition is a flawed strategy that will cost you in missed Tax Savings ($).
Cost Segregation Professionals are not Appraisers/Valuation Professionals! They do not Opine on Value! There expertise is limited to:
1)Real Property analysis
2)Calculating ‘Replacement Cost New less Depreciation’ not ‘Value’.
This limited scope of knowledge, by the Cost Segregation Professional, without the support of Appraisal/Valuation Professionals will limit Your Federal & State Income Tax Saving ($) significantly.
We will demonstrate (below) that Cost Segregation Professionals, though they can provide significant tax savings, are limited in the identification and tax savings ($) they can offer, without the support of Appraisal/Valuation Professionals
Examples:
Cost Segregation Study without the support of Appraisal/Valuation Professionals:
Our Cost Segregation Professional is hired to conduct a Cost Segregation Study and is provided with three pieces of information by the new owners of the Property: ABC Hospitality, LLC.
1)Address of Property: 123 Somewhere Drive, Somewhere, USA
2)Purchase Price: $10,000,000
3)Acquired Date: January 1, 2024.
Our Cost Segregation Professional, without an Appraisal/Valuation support team, makes a common assumption that the under-lying land value is 15% of the total acquisition value of $10,000,000 ($1,500,000). A number ($) that is not supportable if it were to come under audit by the In-House Accounting Team, Your CPA Team, or the Internal Revenue Service (IRS)!
A Cost Segregation Study without Appraisal/Valuation Team Support:
A nice reallocation of Property from Long-Lived to Short-Lived Property: $3,300,000.
Cost Segregation Study with the support of Appraisal/Valuation Professionals:
Now, let’s see what happens with our team consisting of Appraisal/Valuation Professionals and our Cost Segregation Professional work together on the same project.
Given the same information from the Client:
1)Address of Property: 123 Somewhere Drive, Somewhere, USA
2)Purchase Price: $10,000,000
3)Acquired Date: January 1, 2024.
Our Team of Valuation/Appraisal Professionals and Cost Segregation Professionals have decided that Four Professionals will be needed for this assignment:
1)Real Property Appraiser to value the Underlying Land Value.
2)A Business Valuation Appraiser to value the Reservation System and Branding (Intangibles).
3)Furniture Fixtures & Equipment Appraiser to value the Furniture & Equipment on site.
4)Cost Segregation Professional to identify, and capture, all 5, 15 & 39-year Real Property.
A Cost Segregation Study with Appraisal/Valuation Support:
A better reallocation of Property from Long-Lived to Short-Lived Property: $4,478,000.
This Appraisal/Valuation/Cost Segregation Professional Tax Strategy is superior to Cost Segregation Services provided in isolation for the following reasons:
1)It provides a true, and accurate, Land Value conclusion that is supportable to the Internal Revenue Service! Many times, this value conclusion is lower than the ‘non-supportable estimate’, assigned by the Cost Segregation Professional!
2)Our study accounts for, and Values, all ‘Intangible Property’ that a Cost Segregation Professional is not trained to identify and value!
3)Our study accounts for, and Values, all ‘Furniture, Fixtures & Equipment’ that a Cost Segregation Professional is not trained to identify and value!
4)Our study provides a more detailed conclusion, and asset breakout, which allows for its use in Purchase Price Allocation filings (ASC-805) and for posting on your company’s Fixed Asset Record System.
Conclusions
The conclusions provided by our Appraisal/Valuation/Cost Segregation Team will provide added Tax Savings ($), an Audit Supportable Study, and A Multi-Use Study that can be used for Purchase Price Allocation Studies (ASC-805), Fixed Asset Record System Reporting, Repair Regulation Compliance, and a whole host of other accounting and tax needs.
Our Appraisal/Valuation Team can also provide Fine Jewelry, Fine Art, Fine Furniture, Aeronautic and Marine Appraisal/Valuation Services when needed for any assignment.
