MULTIFAMILY COMPLEX

TAXES SAVED: $470,000

Engagement Overview:

Bedford was engaged by a real estate holding company to conduct Cost Segregation Studies for numerous multifamily complexes that they owned. The objective of the engagement was to identify assets that could be moved to shorter recovery periods in order to accelerate depreciation and defer taxes.

Property Overview:

This $9.7 million apartment complex was placed into service in March 2004 and consists of 12 apartment buildings, clubhouse with pool, daycare, laundry, and mailbox kiosk. There are a total of 180 living units at the complex made up of ninety 901 square foot, 2-bedroom, 2-bath units, and ninety 1,150 square foot, 3-bedroom 2-baths, and study units. The entire complex is on a 14 acre parcel of land.

Engineering Process:

Our engineers examined all design and construction documents, contractor payment applications and other related data determine the cost basis for every component in the building. Next, our engineer conducted an inspection to identify and photograph all assets eligible for accelerated depreciation.  Our team (on-site engineer, senior engineer, and tax specialist) reviewed the cost segregation study and certified its completeness and accuracy.

Estimate of Benefits:

The pre-engagement estimate, based upon client supplied project information, showed a potential reallocation of 25% or $2.4 million to shorter recovery periods. The projected tax benefit was $372,000 in current year tax payment savings Actual Results: Our study resulted in a total of 32.6% or $3.1 million being rescheduled to 5 and 15-year property. Also, the entire $3.1 million was eligible for 30% bonus depreciation. As a result, the owners will save $470,000 in current year tax payments.