specialty tax insight

Specialty Tax Team Educates Prospect on Cost Segregation

November 8, 2023

Prospect Need

A referral prospect needed assistance with a concentrated stock position and was seeking to build a rental real estate portfolio. He didn’t fully understand cost segregation and wasn’t sure if it was right for him. 

“Someone might shy away from cost segregation because a property isn’t big enough,” said Steve Ruda, director of tax. “We can group all property into one project. That said, a client should shy away from cost segregation when planning to sell because of recapture. If a client plans to sell real estate in five to 10 years, he will incur recapture tax. If the sale is handled the right way, the client isn’t going to have much recapture (3% to 4%). Many individuals don’t understand recapture rules.”

Firm Solution

Senior Wealth Advisor Eron Reyes, CFA®, CFP®, coordinated a call with the specialty tax team to educate the prospect on cost segregation. While the prospect decided to delay a cost segregation study, he was grateful for the insight and team introduction. Knowing that he will have access to the specialty tax team as a future resource led him to commit to becoming a client. Furthermore, this was the first referral from the advisor. He commented that it was a great experience working with our team and was impressed by the breadth of our services.

Advisor Goals:

  • Generate interest: It’s a good idea to discuss cost segregation with individuals who have investment real estate to generate interest in the concept and to differentiate ourselves.
  • Have an introductory call: Take time to share our firm’s mission, ask questions about a prospect’s property and include an educational deck in a formal proposal.
  • Offer a complimentary benefit analysis: Be prepared to also discuss a prospect’s cost segregation potential with the specialty tax team before calling the prospect to discuss the concept further. 
  • Educate prospects: As noted above, many don’t understand recapture rules and other aspects of the concept, so education is a good first step.
  • Call on the specialty tax team as a valuable resource. In addition to cost segregation, this team can help with research & development credits, 179D energy-efficient commercial buildings, 45L energy-efficient home builder credit and employee retention credits.

This article is intended for investment professionals and is provided for informational and educational purposes only. No representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. Reliance upon information in this material is at the reader’s sole discretion.

Any personal comments or previous results experienced by advisors are unique to those situations, and there is no guarantee of similar results and this may not be representative of the experience of other advisors.

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