Tax Benefits Summary
Cost Basis: $10,634,585
Cost Reallocated: $1,394,418
Reallocation Percent: 13.1%
1st Yr. Deferred Tax: $277,692
Total Deferred Tax: $365,223
Owners of a real estate construction company engaged the Building Cash Flow team of engineers to conduct an Engineering- based Cost Segregation Study for a newly constructed multi-tenant office building located on the southern east coast. The Study objective was to identity property components that could be reclassified to shorter recovery periods to accelerate building depreciation and defer income taxes.
This new 5-story office building consists of approximately 7,500 square feet of corridor and common area and approximately 100,700 square feet of lease able tenant space. General construction consists of a four inch thick concrete slab on grade reinforced with welded wire fabric over four inches of crushed stone on top of a vapor barrier. The steel framed structure is enclosed with brick veneer and insulated fixed glass in aluminum frames. Typical interior finishes include drywall over metal stud partitions finished with paint and hollow metal, and wood doors with frames and hardware. Floors two through five include two elevators, restrooms, two sets of stairs, an electrical room, a HVAC room, a telephone service room, and a janitor's closet. The first floor, in addition to the typical floor design of floors two through five, includes a mailroom and an elevator equipment room. Land improvements for this site include retaining wall, asphalt paving, concrete curbing, brick pavers and concrete sidewalks, underground utility and storm drainage, site lighting, general landscaping and irrigation system. The property has a cost basis of $10,634,585 and was acquired and placed in service in 2002.
Our construction engineers performed a complete analysis of all available construction drawings and specifications, contractor payment applications, invoices, and other supporting documentation. We prepared a detailed analysis of all accumulated data on a property unit basis for cost allocation purposes under the provisions of the Internal Revenue Code. We then performed an onsite inspection to verify, photograph, and document the property. Finally, our internal audit team of senior construction engineers and tax specialists reviewed and certified its completeness and accuracy.