Apartment Complex Tax Strategy Case Study
The client had acquired a 12-building garden style apartment complex in the mid-1980s. Because the property had been acquired before 1987, it was not eligible for cost segregation. The client approached Capstan to learn about other tax strategies that might be applicable.
The Capstan team suggested that the client begin with a Unit of Property Survey—a thorough and accurate compilation of all assets by category, as defined in the new Tangible Property Regulations. The team explained that this study would essentially “tee up” the client for future tax savings via the possible reclassification of capitalized assets as expenses under the Tangible Property Regulations (Betterment/Adaptation/Restoration Test and Materiality Test).
As Capstan tailored this strategy to the client’s specific needs and limitations, the client was pleased to discover that Capstan is “more than just cost segregation.”
The Capstan engineer conducted a thorough assessment of the property and analyzed client-provided historic cost records. He then categorized each asset into the appropriate classification as outlined in the Tangible Property Regulations. The client was pleased with Capstan’s attention to detail and was enthusiastic about laying the groundwork for future savings.
Capstan encouraged the client to take full advantage of this Unit of Property Survey, suggesting that a ReCap analysis be performed in the future. The Capstan team reiterated that a quality Unit of Property Survey can be the bedrock on which a lifetime of tax savings may be built, and assured the client that Capstan is available for long-term support.