9 Out of 10 Commercial Property Investors are Overpaying on Income Taxes!

Year after year, the Federal Government has continued to incentisize those who invest in Commercial Property. The IRS has established guidelines that, if ignored, cause commercial real estate investors to pay more in taxes than they should.

What guidelines are being ignored by Commercial Property Investors?

Those revolving around Accelerated Depreciation; known in the taxation world as Property Cost Segregation.

Ramifications of Improper Depreciation Allocation

Most commercial property investors do not truly understand the substantial benefits of accelerated depreciation. This is evidenced by our analysis of thousands of depreciation schedules over the years. We have found less than 10% of investors are properly depreciating their properties. The most common misconception is, “I am going to get this money anyway”. Is this a true or false statement?

Let’s investigate…

Capital Gains vs Ordinary Income Rates

Although the mechanics of these calculations are not always as simplistic as we will be making it for this example, the short response is – increased depreciation leads to paying taxes at the capital gains rate as opposed to the ordinary income rate. Since capital gains rates are likely much lower than the Investor’s income tax rate, they would benefit from accelerated depreciation.

Time Value of Money

Simply put, your dollar is worth more today than it will be in the future. A tax dollar saved today therefore is worth more than a tax dollar saved in the future. Why lock up a tax savings in your property for 27-39 years when you can receive it today?

Catch-Up Depreciation

If you have not completed a Cost Segregation study on your property that you have held for a period of time, did you know that you can capture your entire missed benefit immediately? The IRS allows you to complete a 481 adjustment thus enabling you to catch up all the missed accelerated depreciation into the current tax year. This provision alone could save you hundreds of thousands immediately!

The Power of Cash in hand

You are a real estate “investor”. This means you understand the investing power of having funds in your hand today. Cash today [in the form of tax savings] enables you to invest in additional properties. The benefits of this are exponential and allow continued growth of your investment portfolio.

Correct allocation of real estate depreciation is essential for Commercial Property Investors to effectively manage their tax situation. Are you one of the 90% who are missing out on opportunities that 10% of your competitors are capturing?

Cost Segregation with No Upfront Fees: Larry@yourwotc.com

Credit Card Audit Overview

Our Credit Card Audit focuses solely on expense reduction within the payments industry. Our expertise and experience coupled with our through expense reduction process, ensures a competitive advantage over other firms advertising similar services and you no not have to change processors

Our two-phase approach to expense reduction is unparalleled in the payments industry. We correct the processing plan to reflect the most competitive plan type and rate, using formulated, specific asks of the existing provider. Our team then works with the client to further reduce the non-negotiable fees through processing optimization, where we can help qualify payment transactions at lower interchange rates by passing through additional processing data.

We have seen the highest success rate for merchants that process credit card transactions where the card is not physically present. This is referred to as a Card Not Present (CNP) environment, and includes B2B and eCommerce companies. Companies processing card payments between $1M and $20M on an annual basis typically have the largest potential savings opportunity. For card present locations, where the credit card is physically swiped at a terminal device, there may still be significant savings.  

Clint must submit 1-2 recent merchant processing statements along with the Audit Services Agreement in order for us to perform an analysis.  

Our Credit Card department will present findings to Client upon completion of the initial analysis.

After receipt of all / any additional required documentation, we will begin securing lower fees directly with the merchant services provider. On average this process takes 30-60 days from receipt of all client documentation needed to process the lowering of fees.

To begin, contact us now at Larry@yourwotc.com

We are not a merchant processor.

Cost Segregation and Depreciation Recapture

Depreciation recapture is an often misunderstood aspect of tax planning and comes into effect only during the sale of a property.  

Recapture is limited to the lesser of the gain or the depreciation taken. Meaning, first you have to sell the property and have a gain on the sale to even be concerned. 

To have a loss, one would have to sell the property for less than its net tax value. For practical purposes, the depreciation taken is the main limiting factor because the IRS calculates gain as the selling price less the net tax value (cost less depreciation taken). The recapture rules dictate how the gain is taxed, with § 1245 governing personal property and § 1250 governing real property. Section 1245 dictates that the accelerated depreciation taken on personal and real property be taxed at ordinary income tax rates. Section 1250 requires that depreciation taken on real property be taxed at a 25% capital gains rate. Any gain in excess of the total depreciation is taxed at the normal capital gains rate, but this does not wholly dictate whether recapture eliminates a need to do a cost segregation study. This is illustrated in the example below.

Assuming your client has sold or is going to sell their building, let us use the facts below to show the benefit of a cost segregation study.

• Property purchased 6/1/2005

• Cost = $5,000,000 with a breakdown of:

» 5 - year  – $1,000,000

» 15 - year – $750,000

» 39 - year – $3,250,000

• Selling price of $10,000,000

• Effective tax rate of 40% (Fed. & State)

• Interest rate of 6%

Using these assumptions, we can calculate the benefit on the sale derived from the cost segregation study taking the accelerated depreciation now vs. depreciating the building at a 39-year life. The benefit of the study is compared to the increased tax generated by the study in the table below.

	Benefit of Study	Extra Tax w/Study	Net Benefit
If sold in 2008	$291,439	$261,636	$29,803
If sold in 2009	$380,711	$330,265	$50,446
If sold in 2010	$456,023	$380,984	$75,039

Note: Calculations based on accumulated depreciation at date of sale, not net present value.

Keep in mind that depreciation recapture occurs only to when the sales price is allocated to a specific item in an amount sufficient to produce a gain. Therefore it is essential that the selling price allocation be as part of an appraisal. When a building is sold, for purposes of calculating the gain on the sale, the sale price should be allocated to the specific items based on their fair market value at the time of the sale. While conventional wisdom might suggest that appreciation of real estate generally occurs due to economic appreciation on land, and inflation on the cost of materials and labor, other factors such as income stream and goodwill are often taken into consideration when appraising the property. According to the IRS, the fair market value is not determined by the net tax value but by an appraisal that assigns the fair market value to the property. The IRS will respect a purchase and sale agreement (P&S) in an arm’s length transaction. If a seller allocates the selling price in a P&S to the assets class by class and this is accepted by the purchaser, it will be considered binding on both parties by the IRS – so much so that you cannot do a cost segregation study in this case.

One more point, when a C Corporation sells real property prior to the end of its full recovery period, part of the time value benefit is also lost. However, because all income is taxed at the same rate in the “C” corporation, recapture is a non-issue.

The bottom line is that recapture depreciation does not automatically negate the gain from a cost segregation study. We are not denying that a Cost Segregation Study will produce additional recapture tax, but when you compare the benefit of the accelerated depreciation from a Cost Segregation Study, it usually exceeds the increased tax. 

Get your free analysis now and remember, No Savings = No Fees.

Larry

Larry@yourwotc.com

THE KEY TO THE GATEKEEPER

IT’S ALL IN THE APPROACH, IF SOMEONE BELIEVES YOU ARE IMPORTANT, THEY WILL TREAT YOU DIFFERENTLY


1 – Use a calm and relaxed voice. Smile and confidently greet with energy and ease! Make sure you answer any question about the nature of your call with confidence and authority.

2 – Don’t use a script! A good gatekeeper will recognize it immediately and you will be shut down. Instead, plan your talking points but leave room for improvisation. Speak slowly and articulately. The Gatekeeper will notice if you are rushing through the call.

3 – Engage the Gatekeeper, learn their name. Write it down and use it while you speak to them. Be friendly, this will result in a positive attitude from the Gatekeeper the next time you speak.

4 – Don’t give out more information than is necessary. Remember, you are not selling to the Gatekeeper. You don’t need to go into detail with them, keep it simple! Tell them who you are calling for, do not ask if the decision maker is available.

5 – Do your research, approach with familiarity of the business and of the decision maker. Use the first name of the decision maker. Make it personal! If you don’t know who the decision maker is, ask the Gatekeeper. A simple question of, “Who is in charge of…” can hep immensely. Ask for the best time to call, a direct number to call, email address to follow up with, etc.

6 – Be POSITIVE, if you’re asked if he or she is expecting your call. Answer positively with, “Yes, I’ve sent information that we need to discuss.” You may want to give a sense of urgency by adding, “by the close of business.” to your positive response.

 For More Info:  http://bit.ly/2cv3i8O

Access Discount Healthcare

Access Discount Healthcare is transforming consumer health services by delivering convenient and affordable access to quality health care and well being for the populations we serve. 

ADHC's platform combines cutting-edge technology with access to highly trained healthcare professionals to connect employees with the benefits they need most.  Bringing ADHC to your Client's organization ultimately results in better health outcomes, improved productivity, lower costs, and higher morale for employees or members-which help make your Client's culture both happy and healthy. 

Program Benefits

Triage Nurse Client satisfaction is 98%  Annual client retention is 95% Comprehensive bouquet of services in the industry

Minimum Requirements

We prefer (as will you) to work with larger employers (50+) but will not pass up any employer due to the fact that this is just another tool to help you build your practice and provide benefit to the businesses you want to work with.

                            Larry@yourwotc.com

Are you losing these tax credits on new employees?

Did you know that most companies that are hiring go thru 10-20 applications before they hire? And many businesses don't take advantage of WOTC which provides a $2400-$9600 tax credit for each new hiree. Also, many managers that are using WOTC have to do all the work under deadlines that must be met to qualify for the tax credits. Our proprietary software does all the work swiftly and automatically.

You can test it out now at  www.yourWOTC.com and self-enroll if you wish to.

Business Tax Due Dates, plus obtainable Business Tax Credits

July 12+

Employers - Obtain $2400 - $9600 Tax Credit for each new employee hired (seasonal too)

July 17

Employers - Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in June.

Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in June.

July 31

Employers - Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2017. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.

Employers - Federal unemployment tax. Deposit the tax owed through June if more than $500.

Employers - If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar-year 2016. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.

Certain Small Employers - Deposit any undeposited tax if your tax liability is $2,500 or more for 2017 but less than $2,500 for the second quarter.