2585 SW 87th Avenue, Portland, OR 97225, us
Welcome to Lighthouse Capital Advisors, experts in Cost Segregation
Our Services
Cost Segregation
Proper identification and segregation of assets associated with real property acquisition, new construction, rehabilitation or tenant improvements can result in substantial income tax benefits as a result of the reclassifying qualifying assets to shorter depreciation recovery periods. In many cases, real estate investors and companies establish improper tax lives by grouping these assets as real property and assigning a 39-year (Or 27.5-year for residential real estate) tax life. The cost segregation study consists of analyzing all of the assets related to property such as a real estate acquisition, new construction, rehabilitation, or tenant improvement project with an objective of assigning the assets the appropriate, and generally shorter, recovery periods as personal property or land improvements. Thus, assets are depreciated faster and the associated tax deductions are realized over a shorter period of time. The study can occur at any stage of development or acquisition, but the IRS prefers the study to be completed in the first year that the property is placed into service.
Value Proposition
Most investors and companies are interested in maximizing cash flows. By maximizing cash flow, this study offers a value that is recognized as a time value of money savings. The cost segregation project is designed to ensure that a current and substantial cash flow benefit is recognized by assigning assets the appropriate recovery periods. The value of this project is measured by estimating potential tax savings against the taxes that have been, or would be paid if capitalized as long lived real property.
Benchmarking
We utilize a benchmark that 15-40% of construction costs are typically eligible for classification to shorter recovery periods for new or newly acquired properties. This percentage does vary based upon the type of building that is subject to the study. Additionally, when attempting to estimate the net present value of after-tax cash flows resulting from proper asset classification, a typical benchmark is that the present value benefit will be approximately 20% of the costs classified as personal property and assigned a recovery period shorter than the 39 year period for real property. For example, if a client would have otherwise capitalized $5 million in the 39-year asset life and 10% of these costs could be reclassified to shorter asset lives, the net present value (NPV) of the potential tax savings could be $95,000. A NPV calculation can be estimated for all projects upon request.
About
Lighthouse Capital Advisors was formed in 2002 to serve the growing need for Cost Segregation and Purchase Price Allocation services for all types of commercial and corporate real estate. The founder, James C. Johnson has 30 years of commercial real estate experience. Mr. Johnson learned Cost Segregation and Purchase Price allocation through his work for PricewaterhouseCoopers, LLP, where he last held the position of Manager in its Fixed Asset (Real Estate) group. Mr. Johnson works on a national basis serving the needs of property owners throughout the USA. Lighthouse Capital Advisors conducts cost segregation studies in compliance with current IRS guidelines. Call us today for a proposal for services.