Why Basis

Every other cost segregation firm sells the one study it knows how to make. We do not make studies. That is the entire reason we can put both versions in front of you and tell you the truth about which one your building actually needs.

The problem with asking a firm which study you need

A national engineering firm will tell you that you need a full engineered study, because that is what it produces. A software provider will tell you its automated study is sufficient, because that is what it produces. Both answers are sincere and both are structurally compromised. Neither firm can recommend the other's product without losing the sale.

Basis is an advisory and a brokerage. Our engineering team is a partner firm rather than an in-house production line we have to keep busy. Normally that is the thing a company in our position would hide. We lead with it, because it is the only reason our recommendation is worth anything to you.

Basis compared honestly

The bottom row is the one that matters. If you own a $50 million industrial plant, hire a large national engineering firm, and we will tell you that on the call rather than after you have paid us. We are built for owners between roughly $300,000 and $10 million of basis, which is most of the market and the part of it that gets the worst advice.

The four things we will put in writing

1. Two real tiers, and the honest tradeoff between them

The engineered tier is produced by our licensed engineering team, carries full audit representation and errors and omissions coverage, and is what we recommend by default. The lower tier is software-driven, considerably cheaper, much faster, and carries a thinner engineering paper trail. That paper trail is what defends the deduction if it is ever questioned. We will tell you which one fits your building and why, and if you choose the cheaper tier anyway you will do it knowing exactly what you traded.

2. A minimum return, or you do not pay

Our study identifies at least 20 times its fee in first-year deductions on a commercial property, or at least 30 times its fee on a short-term rental, or it is free. It is a ratio rather than a dollar figure, so it holds regardless of what your particular study costs. We are not aware of another firm in this category that will put a floor on your return in writing.

3. Your number before you pay a dollar

You get a property-specific preliminary benefit estimate first, modeled from real parcel data on your building rather than from a slider on a calculator. Then you decide. Most firms in this category make you sit through a sales call before they will say a number, so here are ours.

How to read the depreciation column: these are estimated first-year deductions, not cash. What a deduction is worth to you depends on your own bracket, so multiply by your marginal rate for a rough cash figure. Deductions are also the unit our guarantee is written in, which is why we quote them here rather than a savings number we would be guessing at. First-year deductions typically run 12% to 20% of a property’s value once land is taken out, which is why the ranges are wide. A restaurant or a heavily fitted-out building lands near the top, a plain warehouse near the bottom. Your actual number comes from the estimate we run on your building before you pay anything, and your CPA confirms it. Not tax advice.

Two things govern every one of those numbers, and both are in your favor.

The guarantee is also a price ceiling. Our fee can never exceed one twentieth of your estimated first-year deductions on a commercial property, or one thirtieth on a short-term rental, because that is what the guarantee promises. When a building reclassifies at the low end, and medical offices and plain warehouses often do, the quote comes down or we decline the engagement. We would rather lose the fee than publish a floor we cannot hold.

The fee follows the finding, not the price of the building. Two commercial buildings worth the same money can support fees that differ by more than double, because one holds far more short-life property than the other. That is why you get your estimate before you get your quote.

4. We will tell you no

A study only pays off this year if you can use the loss this year. We screen that before we quote, not after. If the honest answer is that your deduction will suspend until you sell, we will say so and you will not get a proposal from us. The firms that never disqualify anyone are not being generous. They are being paid either way.

First, can you actually use the deduction this year?

This is the question most firms skip, and skipping it is how owners end up paying for a study that does nothing for them in the current year. A cost segregation study creates a large paper loss. Whether that loss offsets your other income this year depends on you, not on your building.

You can generally use it against active income now if you materially participate in a short-term rental (average guest stay of seven days or less, and you run it yourself rather than handing it to a property manager), if you hold Real Estate Professional status, or if you have passive income to offset. If you own a long-term rental, use a property manager, and have no passive income, the loss is still real but it suspends and releases later, usually on sale. That is a deferral, not a first-year win.

We screen for this before we quote. If your answer is the suspended case, we will tell you, and we will tell you why waiting may serve you better.

Frequently asked questions

Basis does not produce studies in house. So what am I paying for?

Two things. First, the recommendation: which tier your building actually needs, and whether you should run a study at all this year. Second, the guarantee: we put a minimum return in writing and we absorb the risk if our estimate was wrong. A firm that only makes one kind of study cannot offer you the first and has little reason to offer the second.

Is a cheaper software-driven study bad?

Not automatically, and we sell them. The honest framing is that a software-driven study costs less and moves faster, and carries a thinner engineering paper trail. If your deduction is ever questioned, that paper trail is what defends it, and without it you can be exposed to back tax, penalties and interest. For a straightforward short-term rental with modest basis that can still be the right trade. For a complex commercial building it usually is not. We recommend the engineered tier by default and we tell you which case you are in.

Who signs the engineered study?

Our engineering team signs it, and they carry full audit representation and errors and omissions coverage on it. They are a partner firm rather than Basis payroll, and we say so plainly. Basis is your advisor and your single point of contact throughout.

What exactly does the guarantee cover?

It is a ratio, not a dollar amount, so it does not depend on what your study costs. Our study identifies at least 20 times its fee in first-year deductions on a commercial property, or at least 30 times its fee on a short-term rental, or the study is free. Deductions, not cash. If the number we modeled before you paid does not hold up, that is our problem rather than yours.

Why do you turn people away?

Because a study only pays off this year if you can actually use the loss. If you own a long-term rental, use a property manager, and have no passive income and no Real Estate Professional status, the deduction suspends and releases later, usually on sale. Selling you a study in that situation would be an easy sale and a bad one.

Sources

» Internal Revenue Code Section 168(k), additional first-year depreciation
» IRS Cost Segregation Audit Techniques Guide (Publication 5653)
» IRS Publication 946, How To Depreciate Property
» Treasury Regulation §1.168(i)-8
» IRS Form 3115, Application for Change in Accounting Method
» Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997)
» Submarket rent, capitalization rate, and vacancy figures compiled by the Basis property data engine from CBRE, Cushman & Wakefield, Newmark, and Colliers market reports. See Sources & Citations.