COST SEGREGATION ANALYSIS

Cost segregation analysis consists of a process whereby building components that can be depreciated over a relatively short time (5 to 15 years) are identified and reclassified so that accelerated depreciation can be calculated and claimed by the building owner, resulting in the significant deferral of state and federal income taxes and greater cash flow. Generally, apartment buildings are depreciated straight-line over 27.5 years while commercial buildings are depreciated straight - line over 39 years. Unless the owner segregates and re-classifies the building components, he or she will pay substantially higher state and federal taxes in the early years of ownership.