One of Capstan’s CPA partners had a client with a skyscraper office building in a major metropolitan area. The entire building was occupied by a single tenant who had made the owners aware that they intended to vacate within one year. As a result of the impending vacancy, the owners were looking at multiple options for the asset. Given the bullish multi-family market, one possibility was to demolish the building interior and convert it to a multi-family residential layout. Above all, the owners wanted to maximize immediate benefits while laying the groundwork for future possibilities that might require other tax strategies. They consulted Capstan in the hopes of accomplishing both aims.
The Capstan team suggested a thorough and thoughtful approach, taking into account the client’s current needs while recommending strategies that might be helpful in future. Capstan first recommended an immediate Cost Segregation Study in order to maximize depreciation deductions from year one. In light of the property’s uncertain future, Capstan engineers also recommended a thorough Unit of Property analysis to further classify assets in line with the new Tangible Property Regulations. The goal was to accelerate depreciation while documenting assets that could be written off if the building were re-positioned in the future.
This property was the largest office building the Capstan team had ever assessed, and the sheer scope of the project was challenging. In addition, the client needed results very quickly so they could further assess their strategy and the impact of the tax solutions presented.
The Capstan engineer performed a thorough assessment of the property, blending speed and efficiency with Capstan’s methodical precision. The immediate results were extraordinary. Capstan was able to accelerate the depreciation of more than $30 million into personal property, resulting in an immediate tax savings north of $12 million.
The client was pleased with Capstan’s thoughtful approach. By suggesting a thorough Unit of Property analysis as well as the Cost Segregation Study, Capstan had assured that the client had the most accurate and complete assessment of all assets prior to any future demolition. That assessment positions the client to take advantage of partial asset disposition in the future, should the building indeed be demolished, and lays the groundwork for significant future tax savings.
Once the project was complete, Capstan issued “The Capstan Warranty,” which provides the client with audit support up to the field agent level at no additional cost should the project ever be audited by the IRS. In addition, Capstan is available to help the client in reviewing Partial Asset Dispositions (PAD election) should they decide to reposition the property.