Case Study 1
Developer constructed a retail center and invested $10,250,000 for construction costs and tenant improvements. The developer held the retail center as an investment and wanted to maximize non-cash tax deductions.
A UHY Advisors tax professional recognized the opportunity to prepare a cost segregation study to identify costs that qualify for 5, 7 and 15 year depreciation periods.
The cost segregation study identified 24% of the costs as qualifying for these depreciation periods. Without the study, these costs would have been depreciated over 39 years. Using an assumed borrowing rate of 7% and a 35% income tax rate, the client receives a $345,000 economic benefit for the accelerated tax deferral. The client will deduct depreciation of $1,000,000 in the first 3 years in excess of the depreciation allowed using a 39 year life.
Case Study 2
An owner of residential rental property is concerned about the large tax liability that will result from the sale of one of its properties. The property has been owned for 15 years and a refinancing five years ago yielded significant excess cash proceeds . A contract for the sale of the property for $10 million has already been executed. The owner’s tax basis in the property is $3 million and the property secures debt of $7.5 million.
A UHY Advisors tax professional advises the client to consider implementing a deferred section 1031 tax free real estate exchange by reinvesting sales proceeds in suitable replacement properties
UHY Advisors assists the client in adhering to the income tax regulations which require the use of a qualified intermediary and identifying and closing on replacement properties within prescribed time periods. By timely investing the sales proceeds in appropriate properties, the property owner postpones the payment of Federal and State income tax on the deferred $7 million gain.
Case Study 3
An owner of a large commercial real estate parcel is challenging a significant increase in its property tax assessment. The municipality has asked outside legal counsel to defend the assessment.
The outside legal counsel approached UHY Advisors for assistance in defending the assessment.
UHY Advisors performs a substantiation internal audit, including a detailed analysis of the property’s revenue and expenses, which establishes the equitable nature of the assessment relevant to other comparable properties in the municipality. This provides legal counsel with the necessary information to negotiate a settlement that preserves 90% of the increased property tax assessment.