The Nation’s Leader in Cost Segregation Services

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AmCorp Management, Inc. is the Nation’s

What is Cost Segregation?

most successful Tax Analysis Firm

Cost Segregation is the process of identifying personal property assets that are grouped with real property assets, and separating out personal assets for tax reporting purposes. A cost segregation study identifies and reclassifies personal property assets to shorten the depreciation time forreclassifies personal property assets to shorten the depreciation time for taxation purposes, which increases annual deductions, reduces current income tax obligations, thus increasing income and cash flow.

P l t t i l d b ildi ’ t t l l tPersonal property assets include a building’s non-structural elements, exterior land improvements and indirect construction costs.

U.S. Treasury Department, 2004 “Cost Segregation is a lucrative Tax Strategy that should be used in almost every major purchase of Commercial Real Estate ”purchase of Commercial Real Estate.”

AmCorp Management, Inc. is the Nation’s

Reality:

most successful Tax Analysis Firm

These large public corporations employ the best CFOs, Tax Accountants and Bookkeepers, however every year they take their financial data to Big4 Tax firms to have it reviewed by specialists in specific expense areas It is a prudent thing to do however the problem for smallerareas. It is a prudent thing to do, however the problem for smaller companies is they cannot afford the 6 and 7 figure fees that go with it.

We provide mid-size and smaller firms with some of the same specialty i ith t th h f t f M f i hservices without the huge upfront fees. Many of our examiners have

worked for and have been trained by the same Big4 firms.

Our Goal:To provide smaller private property owners the same facility expense management strategies afforded to public companies by the Big4 tax firmsafforded to public companies by the Big4 tax firms.

Our 1st Most Often Asked Questions

ISN’T MY ACCOUNTANT TAKING CARE OF THIS?

• A Cost Segregation Analysis includes an Engineering Study which requires engineering expertise and experience in cost segregation fundamentals. Most accounting firms do not have either.

IRS Cost Segregation guidelines requires a detailed engineering study and analysis to fully qualify for all the available cost segregation tax advantages and benefits. The Modified Accelerated Cost Recovery System (MACRS) is the current

th d f l t d t d i ti i d b th U it d St t i tmethod of accelerated asset depreciation required by the United States income tax code. Under MACRS, all assets are divided into classes which dictate the number of years over which an asset's cost will be recovered.

Cost Segregation requires 3 knowledgeable parties• A Qualified Engineer (MACRS)

• An Experienced Tax Accountant (MACRS and 3115)• An Experienced Tax Accountant (MACRS and 3115)

• A Cost Segregation Specialist

Our 2nd Most Often Asked Questions

WILL THIS BE DISALLOWED BY THE IRS OR CAUSE AN AUDIT?

• No, the IRS has defined the process which guides Cost Segregation Studiesto take the proper deductions.

N it ld t k i d d ti t t i dit• No, it would take improper deductions to trigger an audit.

None of our clients have ever had an audit due to one of our studies. The IRS hasD fi d th t ti d d d it tiDefined the cost segregation process and endorsed its practice.

The IRS defined the process to include:13 ifi C t S ti St d El t• 13 specific Cost Segregation Study Elements

• 9 specific Cost Segregation Report Elements

All which must be included in any IRS approvedi i t diengineering studies.

The Cost Segregation Engineering Study

Tax Benefits of a Cost Segregation Engineering Study will:

1. Provide additional operating capital

2 Minimizing federal tax obligations by accelerating depreciation deductions2. Minimizing federal tax obligations by accelerating depreciation deductions

3. It creates an audit trail, without it improper documentation of cost and asset classifications can lead to an unfavorable tax adjustment.

4. Catch-Up Provision: Since 1996, taxpayers can capture immediate retroactive savings on property added since 1987. This presents additional cash flow potential. p p

5. Additional tax benefits. Cost segregation can also reveal new ways to reduce real estate and sales and use taxesand use taxes.

How It Works?

Engineering Survey and Study of an Office Building(Identifying 5 & 7 Year Components)

Decorative  Ceiling

Decorative  Lighting

Decorative  Non‐Structural Wall 

Coverings and Trim

Decorative  Flooring

Items not mentioned: Fire Protection Equipment,Fire Protection Equipment, Junction Boxes, Cabinets,Signs, Equipment, Gas lines, Electrical lines, Data Room Equipment, Power Panels, Conduit Data Lines HVACConduit, Data Lines, HVAC System, Cable Trays, Improvements, etc…

Partial List of other Components that

• Communication

can be Segregated and Re-Classified

• Emergency Fixtures • Sinks Drains• Systems Transformers• Hospitality Fixtures •TV Outlets & Wiring • Distribution Panels• Distribution Wiring

g y• Waste Interceptors • Security Systems• Monitoring Systems • Conduit/Wiring

to Special Systems

• Specific-Use Structures• Foundations • Mezzanines Stairs • Platforms • Structural Steel• Distribution Wiring

• High Voltage Switchgear • Data Jacks • Miscellaneous Outlets • Emergency Power

C t D t /P

to Special Systems • Flex Space • Demountable Power Systems• Shower/Deluge Fixtures• Supply & Waste Systems

G /C d Ai

• Structural Steel • Task Lighting • Vents Beams Columns • Gas Systems• Vacuum Systems

E h t S t• Computer Data/Power • Supply/Exhaust • Kitchens• HVAC Systems • Environmental Controls

• Gas/Compressed Air • Millwork Floor Coverings• Window Treatments • Wall Coverings • Demountable Walls

• Exhaust Systems • Waste Interceptors • Audio/Visual Systems • Buss Ducts • Neutralization Basins

• Computer Environ. Control • Communications • Fire Protection Systems • Specialized Air Systems• Filtration/Sensing

• Decorative Lighting • Signage • Sidewalk & Curbing • Parking Lots & Curbing • Landscaping Fencing

• Humidity/Temp. Control • Site Utilities • Sewer• Drainage Systems • Outdoor LightingFiltration/Sensing

• Break/Coffee Stations Landscaping Fencing

• Swimming Pools Outdoor Lighting

• Much more…

Eligible Percentages by Property Type

Experience has shown that an average of 32% is typically eligible for Cost Segregation.

A Few Examples

Office Building - Purchased 2007 for $27,500,000 with 18 Units and 151,000 Square ft.

Asset Class Asset Life Original Allocation Allocation After C.S. Study

Personal Property 5 Year $0 0% $3,025,000 11%

P l P t 7 Y $0 0% 0 0%Personal Property 7 Year $0 0% 0 0%

Land Improvements 15 Year $0 0% $3,300,000 12%

Real Property 39 Year $27,500,000 100% $21,175,000 77%

TOTAL ALL $27,500,000 100% $27,500,000 100%

Financial Gain From Accelerating Depreciation

Value of Property Accelerated $6,325,000

Percent of Property Accelerated 23%

h h f $Year 1 through 6 Tax Benefit $1,454,750

A Few Examples

Motel- Purchased 2005 for $10,925,000 with 32,000 Square ft.

Asset Class Asset Life Original Allocation Allocation After C.S. Study

Personal Property 5 Year $0 0% $2,294,250 21%

P l P t 7 Y $0 0% 0 0%Personal Property 7 Year $0 0% 0 0%

Land Improvements 15 Year $109,250 1% $437,000 4%

Real Property 39 Year $10,815,750 99% $8,193,750 75%

TOTAL ALL $10,925,000 100% $10,925,000 100%

Financial Gain From Accelerating Depreciation

Value of Property Accelerated $2,731,250

Percent of Property Accelerated 25%

h h f $Year 1 through 6 Tax Benefit $682,912

The IRS has specific regulated requirements for Cost Segregation Studies and Reports.

The IRS has 13 specific Cost Segregation Study Elements

The IRS has 9 specific Cost pSegregation Report Elements

Many of today’s Cost Segregation firms are not g g

maintaining IRS guidelines for their Cost Segregation Studies!

Who needs a Cost Segregation Study?

Anyone who:

1 O b ildi ith $1 000 000 i t l1. Owns a building with over $1,000,000 in property value.

2. Has net income and is a profitable tax paying entity.

Qualifying Properties:

1 Purchased or Built their facility within the last 12 months1. Purchased or Built their facility within the last 12 months.

2. Purchased or Built their facility since 1987.

3. Facility with Renovations or Additions.

4. Any Change of Ownership.(Including Estates)(Including Estates)

Tax Treatment

SIMPLE:

1 C t h d i ti i t k i b fili IRS F 31151. Catch-up depreciation is taken in one year by filing IRS Form 3115(Change of Accounting Method)

2. There are NO amended tax returns to file.e e a e O a e ded a e u s o e(File a new depreciation schedule)

3. Payments accompanying quarterly tax filings may be immediately reducedimmediately reduced.

Our Process

P id ith t bli ti f ibilit t dProvide you with a no-cost, no-obligation feasibility study

This will:

• Identify your accelerated tax benefits

• Outline the Cost Segregation processOutline the Cost Segregation process

• Outline our fees

• Highlight your responsibilities

• Detail the timeline of the process

The Next Step

YOUSUBMIT A LETTER OF UNDERSTANDINGSUBMIT A LETTER OF UNDERSTANDINGPROVIDE COPIES OF THE FOLLOWING:

Purchase or build costs and dataDepreciation tax schedules

AmCorp ManagementANALYZE YOUR RECORDSPROVIDE A FEASIBILITY STUDY

Upon approval of the Feasibility Study, we will prepare a quality and IRS approvedwill prepare a quality and IRS approved Engineered Cost Segregation Study.