Watch Our Webinar About The CARES Act, Cost Segregation & Property Owners

About This Webinar

The 2020 CARES Act offered business owners a way to generate cash flow through lower taxes and tax refunds from prior years. Although there are many benefits provided to business owners through the CARES Act, two specific items significantly benefit property owners. Learn how Moskowitz LLP utilizes Cost Segregation Studies to identify Net Operating Loss Carrybacks and Qualified Improvement Property as you can now retroactively apply depreciation to Qualified Improvement Property.

This webinar is a must for all who own property in addition to their primary residence, real estate investors, and real estate portfolio managers.

 

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Webinar Transcript

Elizabeth Prehn:
Welcome, everybody. Steve, take it away.

Steve Moskowitz:
Welcome, everyone. Welcome to Cost Segregation. And I’m really excited about this because this saves you taxes. I love saving taxes and what happens with it is it deals with the time value of money. That’s how banks make all their money with the time value of money. So, essentially, we’re going to show you today how we’ll take something as mundane as depreciation, which most things are depreciated, real property over either 39 years or 27-1/2 years, and how we can accelerate that.

Steve Moskowitz:
So, what that means in English, is that instead of having checks to the IRS and state for your taxes, you have a great tax savings and then you could do whatever you want with that money, including investing it and earning on it. And just think about it, instead of paying money to the government, you’re investing that money for yourself. And also, this is approved by the government. We’ve been doing this for a long time. We’re tax attorneys and we work together with a very prestigious company that specializes in the cost segregation. We’ve worked together many years. We’ve done many, many of these. We have dramatic results. We have clients that saved hundreds of thousands of dollars a year.

Steve Moskowitz:
And over all these years, has the IRS ever said, “Hey, what are you guys doing?” A few times they have and we have a perfect record and the reason we have a perfect record, this is statutory. It’s not that we dreamed up some scheme and tortured some case. This is statutory. By law, we’re entitled to do it. You say, “Oh, that’s wonderful, but my God, I didn’t buy a building this year. I bought it last year and I’m using that 39. I’m using that 27-1/2. What am I going to do? Oh, no, oh, no.” The answer is no problem. It’s called a change of accounting method. We come in and we go ahead and we change it.

Steve Moskowitz:
So, what’s the mystery here? What’s the magic? Well, here’s what happens. We say, “Okay.” We send an engineer to your property and he or she will go over the property and say, “Okay, now this portion is 39- or 27-1/2-year property, but this portion is 15-year property, this portion is 10-year property, this portion is five year property. And this portion, we can write the whole thing off right now, today.” And under the last Tax Act, we had a tremendous benefit where something called bonus depreciation was stepped up from 50% to 100%. Isn’t that wonderful? However, there’s been a change in administration. And it’s believed that the administration wants to go back and drop it back from 100 to 50.

Steve Moskowitz:
So, what that means is, you can do it right now. There’s a reason to say, “Hey, guys, do it right now.” You don’t want to say, “That’s a great idea. Wait a while. Contact us.” It’s, “Yeah. It is a great idea. We can still take 50%.” “No, no. Let’s go ahead and let’s get it all now.” So, the bottom line is for those of you that know me, I get very excited when I talk about tax, but we want to go ahead and doesn’t everybody? But what we’re going to do is we’re going to go ahead and talk to you about what are the details with this. And I want to go ahead and turn the floor over to my good friend and colleague, T.J. Leonard. T.J., wow us.

T.J. Leonard:
Thanks, Steve. I appreciate the introduction. And I think what Steve just said is right on especially right now is the absolute time to do this and to piggyback on what Steve said is correct. In the former administration, it was 100% bonus depreciation and the biggest piece to that is it didn’t have to be a brand new constructed building. It could have been something that you bought that’s been there for decades and decades or centuries and centuries. As long as you just newly acquired that building, it started from year one all over again. So, you got 100% bonus.

T.J. Leonard:
The new administration, as Steve mentioned, is going to revert back to 50% and that 50% is only going to be on new construction. So, if you think about it, you’re actually able to double dip, if you will, right now and that’s the reason for the webinar and that’s the reason to make sure that we share the message. So, I’m going to get right into it and make this as informative and as quick as possible.

T.J. Leonard:
But just a little bit about me. Our company is Cost Segregation Services, Incorporated. We partner with Moskowitz, LLP and we have for many years. We’ve got a great relationship, but most importantly, the clientele from Steve’s firm has seen literally millions of dollars now back in their pockets and that’s what we want to be able to share with you today.

T.J. Leonard:
So, with that being said, what Steve mentioned, most folks don’t realize that they can take advantage of cost segregation. There’s what we call the standard line method, which pretty much most people operate under and then there’s cost segregation, it’s an IRS approved method since the ’90s and it just is a matter of taking advantage of it. So, this is just a quick synopsis of what that means, if you had a million dollar purchase price and if you have commercial property, that’s deemed anything that isn’t residential. Now, the residential, we want to clarify that would be like multifamily property, apartment complexes, condos, or even in some cases, if you have rental homes that you rent out, and you’re showing income, those can, those can qualify as well with some specifications, but they’re very moderate.

T.J. Leonard:
So, with that being said, you’re being able to take if you look down here, your year 1 up to year 20, you’re getting all of that depreciation immediately as opposed to having to wait upwards of 39 years and what this is showing you is if you do it the standard way, and you take that $1 million purchase price, your CPA is going to write off $9,400 every year. Same number over and over and over again. So, if you don’t keep your property for 39 or 27-1/2 years, you essentially leave all that money on the table and you leave it with the IRS. And I know two things are certain: Death and taxes and I’d rather minimize my taxes and be able to have it in my pocket instead of theirs. The cost of-

Steve Moskowitz:
But also having it so early with the time value of money, $1 benefit today, just think about it. The money that you save with T.J. and with our law firm, you can invest that money. So, the bottom line is over this period of a time, what you don’t pay the IRS and the state is earning money for you. That’s one of the really exciting parts about it. T.J. is very modest.

T.J. Leonard:
I try to be.

T.J. Leonard:
Cost seg is cash flow, plain and simple. We’re putting money back into your pocket today. That’s the gist of it. Instead of having that cash being spent or with the IRS over 27 or 39, or maybe only keep your property 15 years, this is being able to take advantage of every single dollar that’s in that building. And don’t get your mind wrapped around, “Well, I’ve put this. I’ve put that.” We’re simply talking about the building itself. So, it doesn’t matter if your business was profitable or not profitable, you still have the ability to utilize cost segregation on that building. So the highlighted portion here, the benchmark, and I’m going to let everybody kind of read on their own because to me when you have a webinar and you’re reading things right off the screen, it just becomes mundane.

Steve Moskowitz:
And one of the things I would talk to you about with profits is if you have a loss, the Cares Act changed that. And now, the Act before that, mostly, for most businesses took away NOLs in their operating losses. Now, with the Cares Act, we can take a loss that you’ve generated in 2020 or ’19, or ’18. And actually go back five years to 2014 and in that five-year period, recover taxes you paid. So the bottom line is, it’s not only the potential to save money for this year, you can even get money back from previous years and to expedite, get the money to you faster. The IRS set up a special fax line to get the money in your hands really quickly. So, again, just all kinds of benefits here.

T.J. Leonard:
And we’ll touch on that, too, here as well, but what I want to just say is if you think about your building, and let’s just say that you have a million-dollar building, that’s $1 million, you’re looking at roughly $60,000 to $100,000 back in actual tangible cash in your pocket for that building. I can think of a lot of ways to spend $100,000 right now. And I always tell my clients, if I gave you $100,000, to go to Vegas for the weekend and you came back with a million, that’d be a pretty good weekend and a pretty good net profit. That’s what cost segregation is. So-

Steve Moskowitz:
Without that kind of risk.

T.J. Leonard:
Without the risk. Since it’s lunchtime, I figured why not show a hamburger? So, the straight line method is your standard Big Mac, right? It’s $3.99. It is, what it is. It’s just a line item. What cost segregation is, is pulling out every specific thing, including the sesame seed and being able to say, “Listen. Yes, you have a light bulb in your building. But does the IRS know if it’s a filament light bulb, a fluorescent light bulb, or an LED light bulb?” They all have different valuations. No different than the burger. “We’re going to pay for the lettuce, we’re going to pay for the cheese, the pickles, the onions, and the sesame seed bun. And I know, don’t ever forget about those two all-beef patties.”

T.J. Leonard:
So, a couple of case studies because really, the proof is in the pudding. So, I just put a few of them on here just to show kind of the complexity. But here’s a self-storage building on the left, it was purchased in 2017 for close to a million dollars. Their tax savings was close to $50,000. And then in 2018, here’s another one with construction of 3.6 million. This one had climate control and the tax savings of $569,000. So, a dental office, a million dollar shell, that’s just the outside.

T.J. Leonard:
And I think the thing I want to key on here is you may also have leaseholder improvements. You may be a lease holder and you don’t own the building itself. If you have $250,000 of improvements, you qualify for cost segregation as well. So, here’s somebody that just had improvements of 450. Yet, they still ended up with close to $75,000 in tax savings. And then finally multiple office complexes purchased as far back as 1999. People think that unless, like Steve mentioned, if it hadn’t been in just the last couple years, that’s not accurate.

T.J. Leonard:
One of the benefits that we’ve created for Moskowitz, LLP is Steve and his team can provide us with your building information and we will complimentary go back and run the numbers for you, so that Steve and his team can present them to you at no cost. So, you can see what you qualify for and then from that standpoint, decide to move forward. And Steve, the last I checked, I can’t remember anybody saying, “No, they didn’t want to move forward.”

Steve Moskowitz:
I’ve never had that. I mean, basically I when I talk to clients, I asked the question, “Would you prefer to A, decrease your taxes or B, increase your taxes?” Everyone laughs and says, “Well, of course.” And I say, “Are you doing this stuff?” And they say, “No.” I said, “Well, in theory, you got it right, but in reality, you’re not.” This is here, we can do this. And if you do it today, we can go ahead and save you taxes on your 2020 return and possibly do an NOL and go back, get money for other years, too. So, again, this and it’s statutory. You’re entitled to it.

Steve Moskowitz:
The Congress people in their infinite wisdom gave us this and sometimes people say, “Well, why would we have such a benefit?” Because in a democracy, there’s two purposes for the tax law. One, we all know about. Get money out of this. But the other one is in democracy, the government can’t say they order you to buy a new building or they order you to make improvements. But it’s good for the economy, they want you to do it. So, how do they get you to do what they want, when they can’t order you? They give you a tax incentive. And that’s where our firm and T.J. get together and say, “Hey, the Congress gave it. Let’s take it with open hands.”

T.J. Leonard:
Yeah. And Steve, great segue there, too, but here’s the NOLs and when we say NOLS, we’re talking about Net Operating Losses. Another great piece to just kind of think about after the hamburger scenario is if you bought a lottery ticket today and you want $100,000 and you had your choice, I can have my $100,000 today or I can have the same $100,000, but I have to wait. I just get a chunk of it for 39 years. I would think everybody would want the $100,000 right now. That’s what cost segregation is, instead of getting a little bit every year, you get it all at once.

T.J. Leonard:
So, one of the nice things about the Cares Act that the Trump administration enacted was the ability to take active versus passive losses and go backwards up to five years and get those back. The most important thing with that is that the rules require that your CPA firm, which is Moskowitz, LLP, can go back up to five years and if you qualify, and you do a cost segregation study on that building, you will have a very large refund coming back to you capturing those losses that you had before. And here in this, my little green medal if you will, but 2020 is the last year to take advantage of this. So, if you don’t do anything after this webinar, at least get Steve’s team the information, so that we can go back and look and present you with some findings and give you the opportunity to say, “I’m sitting on all this money, I didn’t even realize that I was.” And I can go back and capture it because of the Cares Act. There’s no better time to do it, but-

Cliff Capdevielle:
And let me just jump in here, T.J., so-

T.J. Leonard:
Yeah, thanks.

Cliff Capdevielle:
The reason this is such big news is because the Trump Tax Act that passed at the end of 2017, actually did away with the ability to carry back losses. So, this is huge. At most, in the past, we’re able to go back a couple of years. Now, going back five years, we can generate refund checks for clients that we really didn’t think would be possible. So that’s something absolutely every business owner should look at their tax return this year and see if we can generate a loss. And if so, let’s carry it back and get some refunds.

Steve Moskowitz:
Absolutely. And Cliff is the head of our Tax Department. Cliff has over 30 years’ experience doing this. Cliff is a tax attorney and we do lots and lots and lots of these and it’s so dramatic. And the thing that we start off with is T.J. and our firm work together, and then we’ll go to the client and say, “Okay, if you’d like to do this, we’ll save you X number of dollars.” So, before you actually pull the trigger, we’ll tell you, “You will save X number of dollars.” And as T.J. was saying earlier, I’ve never heard anybody say, “Yeah, I don’t want the money, I don’t want the savings.” But we’ll tell you what it is before and then you can pull the trigger.

T.J. Leonard:
Yeah. The people that say they don’t want the money, I try to then buy the building from them, because I’d like it. So, on that notion here, TPR is that it’s just a shortened version for Tangible Property Regulations and what we would all call repair regulations. And the key to this is just inside your building or what we would consider building systems is if you were to go in and let’s say buy a building and you’ve got to chunk some things out or take down a wall or make some drastic improvements, maybe put on a new roof or air conditioning unit, what have you. These help you as well because you can take advantage of the units or property if you will.

T.J. Leonard:
And just say as an example, you bought a building today, and you are going to go have to put some improvements in it or maybe you bought it last year, the year before or what have you, you’re able to do a cost segregation per the IRS regulation in one year. And then all of those repair regulations you did, you can re-depreciate them as long as it’s in a second year. So, technically, the IRS is letting us double dip and take advantage of throw-away depreciation. And it’s fantastic and it’s been around since 2014, it’s just a matter once again of taking advantage of it. It’s there for us. It’s allowable. Let’s use it.

Steve Moskowitz:
And one of the things I’d say about that is all the time in the newspaper, you see these Fortune 500 companies making billions with a B in profit and they don’t pay taxes. And people are like, “How could that possibly be legal?” But it is that’s what our laws are. That’s the system incentives. But the law isn’t written, “Here’s what the Fortune 500 can do and here’s the law for everybody else.” It’s the same law for all of us, but you have to know about these things.

Steve Moskowitz:
And a Fortune 500 company has people like us doing all these things for them. It’s the business that’s smaller than the Fortune 500, the typical owner working long and hard and usually grumbling about, “I’m paying too much in taxes.” All of these things are available, but you have to know about them. So, the bottom line is, we’ll do all this for you, along with lots of other good things, too and you go ahead and do what the Fortune 500s don’t.

T.J. Leonard:
Yeah, just a follow-up on the tangible property regulations. We also refer to them as Cap X and that is just simply saying capitalization versus expense. Where before 2014, a lot of things would get capitalized and what you can see on the screen here, your building systems or your components. And mostly it was, “Hey, if the client is spending over $10,000, let’s capitalize it.” This gives the ability to reverse that and expense it which again, turns into depreciation for you and deductions, I should say and that’s cash. Its cash back in your hand. So, again another thing that-

Steve Moskowitz:
Or another way to look at it. Capitalization bad, depreciation good.

T.J. Leonard:
Correct. So, that the Tax and Jobs Act that went back to 2017, again, back in our former administration, what we started our webinars on this morning or this afternoon was on bonus depreciation. So, just to qualify what that really means. September 27, 2017 is when the Trump administration said, “We’re now going to change the 50% bonus to 100% bonus and we don’t care if you just purchased the building or if you just actually physically took a hammer and nails and built it yourself. As long as it’s newly acquired is the key word, then you qualify for 100%.” And you can see I’ve got that in a second piece there.

T.J. Leonard:
So, even a renovation qualifies for that, but we all believe that in this new administration, it’s going to go away quickly and it may be reverted back to the first of the year, January 1, 2021. However, what we have seen is happening now, are those folks that are taking advantage of cost segregation now and they’ve got an engagement letter moving forward. You’ve got a paper trail of your grandfather, they can’t go back and change that on us. So that’s, again, the reason for getting this information out to you as quickly as possible.

T.J. Leonard:
Steve, do you want to?

Steve Moskowitz:
And I think one of the things that we want to emphasize here is with this law that we’re trying to take advantage of before it goes away is that it just has to be new to you. It doesn’t have to be new construction. That was a big change.

T.J. Leonard:
Correct. Correct. And just lastly-

Cliff Capdevielle:
Well-

T.J. Leonard:
Cliff?

Cliff Capdevielle:
Yeah. And then a question I get T.J. is, a business owner says, “Well, I’ve got a lot of expensive equipment, but it’s all bolted to the floor of the wall or it’s tacked, welded to the floor, so I’ve just been depreciating that over the life of the building, because it’s permanent.” Right?

T.J. Leonard:
Right.

Cliff Capdevielle:
Well, what can we do about… what kind of arguments would we have with regard to immovability there?

T.J. Leonard:
Yeah. What we would consider a part of the building is exactly what you said, Cliff, almost bolted down. So, if it’s bolted and it’s a fixed, that’s part of the building. The other things would probably be more 179 in that aspect. But if it’s part of that building component and I think what Cliff is kind of leading me down the road to is one thing that we do that most companies do not and there’s lots of companies out there that do this, but they’re not engineer-based. And what that means is, is that we’re going to send one of our engineers, including myself to your property and we’re going to physically take pictures of everything on the inside, on the outside, internal components, external components, the building itself. And what that allows us to do is to be extremely finite with the IRS.

T.J. Leonard:
We’re the first company that was established doing cost segregation in the early ’90s. We know where we can be extremely aggressive with them. We know where we have to be very conservative with them. And these are not auditable. This is never going to trigger an audit. And that’s going to come up in my next couple of slides. But there have been, I believe, eight now instances since 1998 where eight clients did have to go through an audit because there’s something else. It had nothing to do with cost segregation. But we will provide our engineer out that audit free of charge. We fly him out. We haven’t substantiate what we’ve done. And that’s why we have such a great track record with the IRS.

Steve Moskowitz:
And such as super tiny percentage being audited.

T.J. Leonard:
Yeah. I think we’re up to 50,000 studies in eight, probably the same, what, less than a 10th of a percent if that. So, a couple of bonus depreciation examples. All right.

T.J. Leonard:
So, if we look at something purchased even back in 2017, the straight line method, which is your 39-year method, it would have just been $26,000 a year. With the acceleration of cost segregation now, that five-year property instead of it being $26,000, now we’re looking at $154,000, because we’ve combined all those five years into one, which is why you’ll see this 26 jumped to 154. But with the bonus depreciation, you’re now adding 15 more years and pulling that four because it incorporates 20 years of tax savings immediately.

T.J. Leonard:
So, now, you’ve got a difference of $26,000 worth of a deduction and $700,000 worth of a deduction and that turns into cash back in your pocket. You can either have the IRS hold it as a credit and use it over the next few years. You can have the IRS use it immediately and send you the rest in a refund check. It’s really up to you. And I think most of our clients, Steve, have found that whatever they owe in that tax share, whatever their tax penalty is that they’re going to have, in this case for 2020, they pay their tax basically with the credit they’ve received and they take the rest back in a refund. And as Steve mentioned, try to go buy another building or invest it in some way.

T.J. Leonard:
So, again, these are assets prior to 2017. And the Tax Act versus after and you can just see some total property costs on different facilities. If you have strip malls, if you have medical complexes, if you’ve got multi-property, which would be multi-unit, which would be apartment complexes, condos, those trigger an extremely high depreciation through cost seg, because you’re constantly changing things out. If you’re a landlord and you’ve got multi multi-units and people are coming and going, you’re having to change things over and over. So, you’ve got even more money than you realize. And you can kind of see here as it moves its way down when we get into the living style or putting people in your buildings, you can see that there’s far more money than just something that is maybe just an office complex with a couple of walls and some desks.

Steve Moskowitz:
Not to mention making your tenants happy.

T.J. Leonard:
Yeah, absolutely. Absolutely. All right. So, who’s this really important to? I think anybody that deals with owners and obviously, Moskowitz, LLP, we’ve got CPAs, we’ve got tax attorneys, we’ve got real estate brokers. Again, getting back to the triple net lease tenant and landowners, cost segregation is always going to be about the building itself. We can’t depreciate the land. The land is what it is, but that building itself is completely depreciable. And as I just mentioned here, too, when we look at our largest beneficiaries, those things that are constantly changing as far as having to change carpets, fixtures, HVCs, what have you, those have the largest amount of depreciation or cash back for our clients that we find.

T.J. Leonard:
So, very simple. As we move forward, all you need to do is basically get back in touch with Steve’s team. And then they can get we’ll work together and we will provide a complimentary study for you. It’s a very quick 10-page study and I know 10 pages is, I don’t even want to read a 10-page book to my kids. But the first few pages is mostly about what we do as a company and how we partner with Moskowitz, LLP. The informative pages are only two, and it’s going to show you what you’re sitting on right now. It doesn’t cost you anything.

Steve Moskowitz:
Let me explain it to you. You don’t have to read it on your own. You’re not the engineers. We’ll explain it to you in simple English.

T.J. Leonard:
Yeah, it really is. So, this is how we work. As soon as we get that back, we kind of have just a quick little sample process. But we’ll look at your tax depreciation schedule with your team. We’re going to then engage at that standpoint once you decide that this is what you want to do moving forward. We will sign an engagement letter, we will then get any information we need through Steve’s team. And all we need honestly is very simple, we need to know that you’ve either got an appraisal that’s been done on it or you’ve got the original blueprints, one of the two.

T.J. Leonard:
We’ve helped clients that don’t have either of the two because maybe they’ve bought the building back within the last 15 years or so. And then we just need to verify the cost basis. And that’s just simply saying, “Hey, I bought this building for a million dollars, the land was $150,000 that makes my cost basis now $850,000.” And we just want to make sure we confirm that before we move forward with the study. Once, we’ve got everything we need, then we will set up a time to do a site review. And that’s myself or one of my colleagues coming out, taking a digital camera and snapping pictures very quickly of all the components that you have.

T.J. Leonard:
If you’re, let’s say, in the medical field and you’re thinking of we’ve got HIPAA and computers and this and that, we’ve done a tremendous amount. We’re not looking for finite details of a computer sitting on a desk. We’re looking for building components and systems. So, we can either do an A, when your clientele is not there or B, when they are. We’re very flexible. It’s up to you. We want to get the study done as quick as possible.

T.J. Leonard:
And then finally, it’s about a six to eight week process, so from that standpoint, once we’ve got everything we need, we’re really at about a four- to six-week. It’s very quick from that standpoint. So, we could start let’s say next week and still be able to have things done for you by April if you’re going that route or you just simply go on extension and we have everything for you and this way instead of paying taxes this year to the IRS, you’re keeping all your money in your pocket and you’re using it where you really need it, to substantiate your business, maybe to take a vacation that you needed to put it back into things that you need family wise or finally, just reinvesting it in more property if you will.

T.J. Leonard:
I mentioned earlier that I don’t want to trigger an audit. Cliff, I think, said it, Steve said it, and I’m sure in the industry, it’s heard over and over again. This is not an auditable offense, if you will. Cost segregation is an IRS-approved method. So, it’s never ever, ever going to trigger an audit. I just want to make everybody aware of that.

Cliff Capdevielle:
Yeah, just to add a point on that, T.J., as you remember, when the tangible property reg first came out, it was actually a requirement that everybody, every building owner, every business owner with depreciable property, go through some sort of cost segregation. So, it’s not only approved, it’s actually required by the IRS.

T.J. Leonard:
Yeah, great point. And I’ll finish up here and I’ve noticed, so we do have on the web meeting, you probably can see, there’s a Q&A portion and a chat portion. And I have received one question that I’ll get to here quickly, just to make sure everybody’s aware. But just very quickly, today, virtually all real property purchases until the simultaneous acquisition of tangible property. For that reason, CPAs should routinely recommend the use of cost segregation, which is exactly what we’re doing here today. And this is recommended by the American Institute of Certified Professional accountants.

T.J. Leonard:
So, finally, who are we and I know I’ve started that the beginning, but let me just tell you how we got here. So, this piece right here, Jim Shreve. Jim is the owner of our company. Jim was and still is, but he’s an engineer and he’s a CPA, but he also has a law degree. Jim was one of the founding fathers of cost segregation in the fact that he sued the IRS on behalf of the Hospital Corporations of America and Walgreens back in 1997. And the IRS lost $800 million and they quickly realized that if we don’t make this thing, which wasn’t called cost segregation until that landmark case, if we don’t make this a rule, then we’re going to lose all this money in the IRS. So, this is how cost segregation got started. And we have the founding father, and that’s who owns the company. So, trust that when we say we have a great working relationship with the IRS, we truly do.

T.J. Leonard:
And then just lastly, my email is here. I’ll leave that up on the screen. You can certainly call me. I am Central Valley based. I have obviously, Steve’s firm, up in San Francisco. But it does not matter if your building is in California, or it’s in the Netherlands, as long as you’re paying taxes in the IRS and you’ve got a building, you qualify for cost segregation.

T.J. Leonard:
One of the questions that was asked is, “Are costs related to qualified improvements and vacation rental homes eligible for the deduction?” So, they are if you’ve got vacation rentals, like Airbnb or VRBOs, those do qualify. There’s one little consideration and that is that you have to have somebody on your tax return that can show 750 hours of work in the real estate field and that can be as simple as maybe somebody in the family is a realtor or perhaps you can actually keep a logbook like we used to do with mileage back in the day. And you keep a log book that every time you are doing marketing, every time you are doing landscaping, every time you’re visiting, again, you just need to be able to show that 750 hours should it ever arise, and Steve, we haven’t run into a case where it has, but we always encourage the clients to do such.

Steve Moskowitz:
We are always talking about having good records and one of the things that we talk about is with the depreciation, it’s wonderful because you have a positive cash flow, so the money that you take in is more than the money you pay out and the expenses. You don’t write a check to depreciation. Depreciation is a theoretical concept. It’s a paper entry. But you have the beauty of a positive cash flow with a tax loss. And you can actually wipe out the profits from that building completely.

Steve Moskowitz:
But then we also get the question all the time, “Well, wait a minute. I have so much depreciation here that I actually put the building into a tax loss. Can I write that tax loss off against my other income like dividends, interest, wages profits from the business?” And then we have the lawyers answer, “It depends.” And part of what T.J. was talking about is if you qualify as something called a real estate professional. And with that, if you’re a married couple, only one spouse has to qualify. And if you do that, not only do you benefit from the real property, but you can also save taxes on your wages or the profits from your business investments. So, that’s still another area that we look into.

T.J. Leonard:
Perfect. Well, if you can see on your screen, there’s a chat box. There’s also a Q&A. If anybody has any questions, certainly type those in and we’re happy to help. From that standpoint, Steve, from your group, we’re always happy to help. That’s why we’re here. And it’s very simple. This is all we need. This is literally all we need to get you a complimentary quote on what you’re building, what you’re sitting on right now. We simply need the year and the month in which you purchased it. When did you acquire that building? So, the month and the year. We need how much you paid for it. Okay? And if you don’t know the land value, we can figure it out. But if you do, then a net number is perfect. But how much you paid for it?

T.J. Leonard:
And then lastly, we need the address. We just need to know where it’s located and what type of business it is. So, if it’s a doctor’s office or if it’s a retail strip center on the corner of X and Y and Z, that’s really all we need to know. Once we’ve gotten that, we’re usually 24- to 48-hour turnaround with our report and we get that report back to you and you’re able to see exactly what type of monies you’re sitting on.

Steve Moskowitz:
And I’m the founder of our law firm and I started over 30 years ago, and before I was a tax attorney, I was a CPA. And the reason that I founded it is I said, “The Fortune 500.” And that’s how I started out because I have heavy duty tax credentials. And I started out working for a giant firm whose client is with the Fortune 500. And I said, “Well, that’s great for the Fortune 500, but there’s businesses a lot smaller than that. They could benefit from this, but they just don’t know it.” So, I went into practice over 30 years ago to basically spread the word and I’ve been doing that ever since.

Steve Moskowitz:
And my colleagues, Cliff, Atty. Cliff Capdevielle, he’s been doing this for over 30 years and Atty. Liz Prehn, you heard her voice, but she’s off screen, we’ve been together for many years as well. And we have dedicated our professional lives to saving tremendous amounts in taxes. And also, we all find it very personally satisfying.

Cliff Capdevielle:
To that point, Steve, cost segregation in some form has been around since the 1962 Tax Act, but really, it was only the Fortune 500 companies that really took advantage of it. And as T.J. mentioned, Jim Shreve with the Hospital Corporation America case, really opened the doors for small businesses. And we can help almost any business owner with real property save money. And I can’t think of a case where we didn’t save multiple of the fees associated.

Cliff Capdevielle:
So, a question that comes up, T.J., I’ve got Steve, he’s an attorney, and he’s a CPA. Why do I need to hire T.J.? Why can’t Steve do this on his own?

T.J. Leonard:
Yeah, great question. Well, number one, I think compliance. It’s always smart for taking the best knowledge you have and the best information you have and farming that out, because number one, you’re compliant. Number two, we know the rules with the IRS in regards to cost segregation, the tangible property ratios, the Cares Act. And from a standpoint, the CPAs and tax attorneys we work with, there’s so many tax laws, so, so many, that a lot of times the little things like cost segregation get mixed.

T.J. Leonard:
So, we’ve developed a good working relationship with each other simply for the fact that kind of like yin and yang. We know exactly where we can push the IRS to get Steve’s clients the amount of money back. And Cliff, you said the keyword, which was multiple. We have found that when in 24 to 48 hours when we provide back your group their first cost segregation analysis. We call it a pre-analysis. Let’s just say, it’s a million dollar building and let’s say that there is $65,000 that is what the pre-analysis shows.

T.J. Leonard:
After we’ve done a site review, because that’s what makes us different being an engineer based and that’s why we can be so finite with the IRS and get so much more money back, because of that site review, that ends up turning into, that million dollar building, $120,000 to $130,000 back and the key word was multiple. I cannot think of a client in all of the years that I’ve done this with the clients that I’ve had, that haven’t gotten back close to time and a half, if not double, what we originally projected. And that’s a huge thing.

T.J. Leonard:
It wasn’t like we went back and said, “Hey, we got your double, we need to charge you more for the study.” It just doesn’t work that way. You still get everything that we provide, we just end up getting more money than we should, but when we put out that pre analysis, we’re conservative. We do that at about an 80% valuation. That way, we know that if something didn’t pan out, we’re still going to get our client exactly what that number is that’s on that paper. But again, I haven’t seen it where that that hasn’t happened, it’s usually been time and a half [crosstalk 00:41:11].

Steve Moskowitz:
And also, another key figure here is evidence. And T.J.’s firm, they’re engineers. So, it’s not like somebody, even with credentials of attorneys, CPAs as well, I guess this is it’s that. It’s like valuations. It’s like we all know the Mona Lisa is valuable, but just how valuable is it? When we have engineers that go in and say, “Look under engineering standards.” Because T.J.’s firm is doing analysis, “Okay, of the total amount you spent, you wrote one check for the building. For the total amount you spent for the building, how much of it’s in this category, how much in this category? How much in this category?” That’s where it’s so incredibly valuable, where an engineer comes in and says, “Yes, I have the evidence to do this.”

Steve Moskowitz:
That’s why we don’t have problems with the IRS is because we have good solid evidence. This is an engineering project. And that’s why our firms work together, because we have the combination of the tax law firm, accountants, engineers, and all one integrated team and we’ve worked together, our firms have worked together for many years and that’s a tremendous advantage to a client. Nothing falls through the cracks. Everything’s taken care of.

T.J. Leonard:
And I think we’re both San Francisco Giants fan, so that’s got to have a lot to do with it.

Steve Moskowitz:
I think T.J. is referring to the fact that I’m also a TV legal analyst and I have been working with the Giants for a lot of years where he’s seen me on NBC Television giving my legal analysis on Giants and lots of other things, too. And I’ve been on the radio for 30 years as well.

T.J. Leonard:
Well, see? We’re proud to be a partner. We’re proud to work with your team. And I know that we’re not able to see your face out there, but it literally cost you no money and no time to send in the information to let us look at your property and find out and tell you what you have back as far as cost segregation goes. And again, you may be sitting on far more money than you realize and why not take a peek at it. And then from that standpoint, make an educated decision to how you want to move forward. But I can’t think of anybody who would not want to keep their tax money in their pocket and not give it to the IRS.

Steve Moskowitz:
I’ve never in my career, spanning more than 30 years ever had a client asked me, “Is there some way I could pay more taxes?” Everybody wants to pay less. I’ve never had anybody say, “No, I don’t want to save the money.”

T.J. Leonard:
Yeah, absolutely, absolutely. Well, I appreciate it. I’m looking at the chat box and the question and answer and I’m not seeing anything roll in. So, I guess that means, Steve, we’ve done, and Cliff, a wonderful job explaining.

Steve Moskowitz:
Back when I was a professor that I used to say when that happened, it’s been a perfect teaching job.

T.J. Leonard:
Years of experience, right? Well, perfect. Liz?

Elizabeth Prehn:
Great. I think you guys did a great job. Thank you very much. And this is recorded, so it will be available. If anybody wants to go over any of the information again.

T.J. Leonard:
Wonderful.

Elizabeth Prehn:
Thank you, everyone.

Steve Moskowitz:
And you can also contact either of our firms. You can contact-

Cliff Capdevielle:
Liz, how do we get a copy of the slides or the presentation if they want it?

T.J. Leonard:
Yeah, great question, Cliff. At this standpoint, all you need to do is get in touch with Steve’s team at Moskowitz, LLP and once you’ve gotten them the information that they need, we’d be happy to send this out. There’s also a lot of other slides that we’ve got or handouts that we’ve got, too. And if you can see on your screen up to the top right, there’s a little handout section, but it’s really what we went over. There’s Tax Act, Jobs Acts, there’s engineering-based, the difference between an engineer-based firm and a non-engineer-based firm. And it’s just more finite detail of what we do should you want to look at that.

Cliff Capdevielle:
And a question that comes up oftentimes, T.J., is client doesn’t have any architectural drawings or engineering drawings, or blueprints or anything like that. Is it okay, can they just give us a call? And can we get started without that?

T.J. Leonard:
Absolutely. We honestly don’t need any of that. We do it for compliance reasons. If you don’t have blueprints, it’s okay. We know when you bought that building, there’s an appraisal somewhere, either through the bank or through the land title company, what have you. As long as we’ve got that and you can confirm the cost basis. And basically, that is through your appraisal saying, “Hey, this is what we bought it for. This is the land removed. Here’s our factual number.” And then, “Hey, we stuck another $450,000 worth of improvements in it, so now our true number is,” that is all we need. That is really all we need.

T.J. Leonard:
All right, perfect. I don’t see any more questions coming in. So with that, Steve and Cliff and Liz, thank you so much for allowing our firm to be a part of this today. Again, as I mentioned earlier, do yourselves a favor and send in your information. Let us take a peek at it and let us tell you what you’re sitting on. It costs you nothing, but maybe three minutes of your time and that three minutes could be worth $300,000.

Steve Moskowitz:
Thanks to all and you can also contact us. We’re at your disposal. We want to go ahead and help you. You’ll see us on the web. You can email us. You can phone us. And Liz, will you give out our contact information or you can call us at 888-Tax-Deal or moskowitzllp.com.

T.J. Leonard:
Perfect. Thanks for having me, Steve.

Cliff Capdevielle:
Thanks, everyone.

Steve Moskowitz:
Thanks for partnering with us.

T.J. Leonard:
You got it. My pleasure.

Steve Moskowitz:
Bye-bye.

T.J. Leonard:
Bye-bye.