A Blog About Tax Savings for Building Owners

Author: John Murphy (Page 1 of 12)

Husband of 34 years to my college sweetheart, Janet Murphy (@janetmurphydesign on Instagram). Together we have 6 wonderful children from ages 15-31 and 5 grandchildren. I've been a licensed REALTOR since 2003 and broker since 2007. I also am a cost segregation specialist helping building owners and real estate investors maximize their tax deductions, save thousands on their income taxes and increase their cash flow. If you're a building owner you probably haven't done a study...let's connect. There is no obligation. We can run an estimate for you and really every building should be evaluated if the basis is over $150,000. I can work all over the country and not just here in the Upstate. We relocated to Greenville, SC for the lifestyle, lower cost of living, amazing amenities in the area and the growth opportunity for business and real estate. We absolutely love it here!

All opinions are expressly my own and do not represent either eXp Realty LLC, Cost Segregation Services, Inc. or any other company, organization or group that I might be affiliated with.

Unlocking Tax-Deferred Wealth: How to Leverage Stock Gains into Dallas Opportunity Zone Real Estate

I follow Barrett Lindberg on LinkedIn and he is the founder of Savoy Equity Partners which invests in Opportunity Zones (OZ) properties in Dallas, TX. If you are sitting on capital gains and would like to try to figure out a way how to defer them, you may want to look at investing in Opportunity Zones. There are plenty of details you need to pay attention to and you should consult your own tax advisor. Also, I cannot personally vouch for Barrett as I don’t know him and have not invested with him. Do you own due diligence on his investments and management. He does seem to be a straight shooter when it comes to talking real estate investment and Opportunity Zones specifically. It looks like they have a long track record of multi-family investing. He seems to have a great grasp on Dallas and Opportunity Zone investments.

I am copying a post Barrett Lindberg published today on LinkedIn about deferring capital gains by investing in Opportunity Zone property in Dallas, TX. I thought it was particularly insightful on the topic.


Barrett Lindberg, Founder Savoy Equity Partners – Opportunity Zones

The stock market is up 23% over the past year and 100% since March 2020.

For many investors, this creates a challenging dilemma: you’re sitting on significant gains but hesitant to sell because of tax implications. This paralysis is costing you opportunities in other markets.

What if you could deploy those gains into real estate while legally deferring your taxes?

Let me share how we’re using Opportunity Zones in Dallas to help investors solve this problem.

Here’s our strategy:

𝟭. 𝗟𝗼𝗰𝗮𝘁𝗶𝗼𝗻 𝗦𝗲𝗹𝗲𝗰𝘁𝗶𝗼𝗻
We target prime Opportunity Zone locations in Dallas’s highest-growth corridors. These federally designated areas offer unprecedented tax advantages while positioning investors in the path of progress.

𝟮. 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁 𝗘𝘅𝗲𝗰𝘂𝘁𝗶𝗼𝗻
We’re building boutique multifamily communities that:

▪ Generate steady cash flow
▪ Meet critical housing needs
▪ Target the “missing middle” of the rental market
▪ Create long-term appreciation potential

𝟯. 𝗧𝗮𝘅-𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝗱 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲
The Opportunity Zone program offers three key benefits:

▪ Tax deferral on invested capital gains until 2027
▪ Significant depreciation benefits during the hold period
▪ Zero capital gains tax on appreciation after 10+ years

𝟰. 𝗠𝗮𝗿𝗸𝗲𝘁 𝗙𝘂𝗻𝗱𝗮𝗺𝗲𝗻𝘁𝗮𝗹𝘀
Why Dallas? The metrics tell the story:

▪ Leading the nation in population growth
▪ Top 5 in job creation
▪ Major corporate relocation destination
▪ No state income tax

Our track record speaks for itself: Since 2011, we’ve developed and sold nearly 2,000 units in the Dallas market. We understand this market and how to execute successfully within it.

𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝗧𝗶𝗺𝗲𝗹𝗶𝗻𝗲:
While the Opportunity Zone program runs through 2047, the window to invest capital gains closes at the end of 2026. This program has become the most successful economic development initiative in U.S. history.

This strategy works for:
✓ Stock market gains
✓ Cryptocurrency profits
✓ Business sale proceeds
✓ Any capital gains

Are you looking to diversify your portfolio while minimizing tax impact? Let’s connect. I’m happy to share more details about our approach and current opportunities.

#RealEstateInvesting #OpportunityZones

Pintail and Dunean Capital Have Big Plans for Fontaine Business Park, Columbia, SC

200 Arbor Lake Dr, Columbia, SC - Fontaine Business Park
Photo Credit: John Murphy, Cost Seg Building – Fontaine Business Park, Columbia, SC

Greenville-based Pintail and Dunean Capital Management are the new owners of the 25 acre Fontaine Business Park in Columbia. SC. It’s a massive property with 4 office buildings and about 250,000 SF.

I had the opportunity to walk the property last week as I’ve been engaged to do the cost segregation study for the new owners. It took us about 4 hours and 12,000 steps but we got through the whole property. I had a chance to walk the property with the new property managers, Reedy Property Management, as well as one of the representatives from Dunean Capital Management.

The new owners plan to make a number of investments and of course bring on new tenants. One of the big names that is public is they have inked a deal to create a new child care for Prisma Health’s Bright Horizons. It will be an child care exclusively for local Prisma employees. I’m always amazed walking commercial buildings to see how they currently exist and then to hear what the plans are for the renovations. The Prisma Health Bright Horizon’s day care is going to be in a great spot at this complex.

There’s a lot of creative real estate pros, managers, developers and investors who are now running Fontaine Business Center. There’s a lot of space here for these guys to get very creative. I have no doubt they will turn this challenged property into a thriving business park in Columbia, SC.

Mungo Homes Opens $10 Million Headquarters

Mungo Homes New Office: Irmo, SC – Photo by John Murphy, Cost Seg Building

I happened to see this in the news this week and I since I was going to be in Columbia doing a site visit for the Fontaine Office Park that I am studying, I thought I’d swing by and check out the new Mungo Homes office building. I was running late so I only got some shots as the sun had gone down. The building is gorgeous and is right on the frontage road that is easily visible from I-26. Not only will this be great space for Mungo Homes employees and customers, but it’s 24/7/365 marketing as the building is lit perfectly!

Congrats to Mungo Homes’ continued success and growth. According to the article published in GSA Business Report, they are looking to move into the Charlotte market as well. Mungo Homes has a significant presence in South Carolina.

Below are a few of the images I took the other night.

Spinx Market & Eatery – Make Convenience Stores Fun Again!

SPINX MARKET & EATERY Greenville SC

The much anticipated Spinx Market & Eatery has opened in downtown Greenville’s West End. What a delight it is!

Ever since I saw the initial renderings for this I was very interested in seeing it in person. It really is fabulous. The retro design is a wonderful throwback and innovative all at the same time. It is a much needed business in this area of Greenville. It’s in the former space for Cook’s Station which moved to brand new space at 515 Buncombe Rd.

Spinx of course is one of South Carolina’s largest developers and are known for gas stations and C-stores throughout South Carolina. This is a new concept for them and one that I believe they could use to expand certainly across South Carolina, but I would think this could do really well in other towns and cities that are like Greenville where you have a very walkable downtown area.

They do serve limited hot food but you can show up for a hot breakfast sandwich or buy their Spinx chicken of course. They also serve drinks believe it or not so if you need something late in the day or after work, they have you covered.

There is lots of outside seating. At the front of the building is a covered patio. That’s shaded in the morning. If you want sunshine, head out back to the patio there where the sun is plentiful.

Steve Spinx has said that with many of the goods that they are selling in the store, that they have tried to use local providers where possible. It’s a nice touch.

When I was there this morning, I asked several people what they thought both as they were coming into the store and leaving. To a person they all said it was great and they had this genuine smile on their faces – like the smile I had as well. The really like it. The response was instinctual in a way. It’s why I am saying that what Spinx has done with their new Spinx Market & Eatery is make commercial real estate fun again with these beautiful new design and concept.

Congratulations to the entire team at Spinx and their design and construction partners who pulled this off!

Can Cost Segregation Be Applied to a Building that Has Been Owned for Several Years?

Yes they can. Generally speaking if you’ve owned the building for more than 12 years or so, it’s probable that it may not be worth studying. But that said, I always encourage owners to let us take a look. It could be that there is still enough basis to make it worth your while. It also could be that we identify capital costs that could be converted to expenses – i.e. the capitalization to expense study.

Cost segregation studies can typically be applied retroactively for properties that have been placed in service within the past several years. Specifically, you can:

  1. Go back as far as 1987: The IRS allows cost segregation for properties placed in service after 1986, when the Tax Reform Act of 1986 was implemented. However, practical and useful applications are usually focused on more recent properties.
  2. Catch up with a retroactive study without amending returns: If a property has been in service for several years, a cost segregation study can be performed now, and the missed depreciation can be “caught up” by filing a Form 3115, Change in Accounting Method. This allows you to claim the cumulative missed depreciation in the current tax year without having to amend prior-year tax returns.

About 40% of the studies we do at CSSI are “look-back” studies where the owner has owned the property for a year or more. I’d be happy to talk with you to see if it might make sense for you to do cost segregation on your property.

John Murphy CSSI

John Murphy CSSI Cost Segregation Specialist

Here’s a bit more information about me as you look to engage a cost segregation specialist. I bring a unique background of sales, market, management and real estate to my work consulting with building owners. I can do studies in all 50 states in the U.S. across all building types and classes. CSSI also does R&D Tax Credits and 179D energy efficiency studies. I’d be happy to help you with those as well.

Are You Overpaying the IRS? The Case for Cost Segregation on Tenant Improvements

Should you do cost segregation on tenant improvements? Most tax advisors and CPAs don’t bother. They just call it QIP (qualified improvement property) which gets a 15 year class life. If it’s 80% bonus as it was in 2023, they just claim 80% in year 1. If it’s in 2024, then it’s 60% and they take 60% bonus in year 1. But did you know that more often then not, the owner of those tenant improvements is paying more money in taxes than they need to be?

If you consider that with a lot of improvements, the 5 year class life will be 25 – 45% of the overall improvement, then it means there’s still more to squeeze out. Consider this scenario…$400,000 tenant improvement. Let’s say that 35% of that would get identified as 5 year class life. If it goes into service in 2024, the tax advisor or CPA is going to take 60% of $400,000 or $240,000 in year one for the deduction. However, $160,000 in depreciation remains and that will be deducted over the next 14 years. But in that $160,000, we said 35% is 5 year class life. 35% of $160,000 is $56,000. So you might now have $56,000 that you could have taken over the next 4 years now lumped together with the 15 year QIP and it gets spread out over 14 more years. For those keeping track, a $56,000 tax deduction at a 32% tax rate is about $18,000 in taxes. So in other words, you are paying $18,000 to the IRS that could have stayed in your bank account over the next 4 years. Yes, there will be those who say it all works out at the end of the day so why am I bringing this up? Sure, it works out over 15 years but you miss out on the opportunity to keep more of your money working now than bleeding it out over 15 years.

If you made improvements north of about $200,000 in 2024, those should be studied. You should at least have it evaluated. Some of those improvements will be able to take partial asset disposition (PAD). That’s a use it or lose it tax strategy. Pretty much most owners miss out on this deduction. They miss out be they are not engaging nor are their tax advisors and CPAs with cost segregation professionals with every single improvement over $200,000. If I had to guess, I would think that somewhere between 97-98% of all improvements over $200,000 are not studied. And they should be.

If you’re okay paying the IRS $5, $10, $15, $20k more than you need to be, no problem. But if you want to squeeze everything out of your building and improvements that you are lawfully allowed to do, then have me run your project through this calculator to see. Every building owner I talk with tells me that they don’t want to pay any more in taxes than they absolutely have to. So why then are you paying more in taxes than you have to? I also hear a lot of building owners that the wish they got more tax strategy from their tax advisor. Okay, tax advisors, here’s a fantastic, easy, cost-effective and inexpensive way to be strategic for your clients.

Got Tenant Improvements? Let’s run them through my model and see what it spits out.

I’ve built a custom calculator to help figure out if it’s worth it or not to do cost segregation on improvements. It’s very details and gives you some tolerances and ranges so you can see if it’s worth it or not. I’ve played around with it and I can tell you that nearly all these capital improvements, tenant improvements, renovations etc. can benefit from cost segregation.

Below is a brief video I recorded demonstrating this calculator. All CPAs, EAs, and tax advisors should run their client’s projects through this model.

Connect with me on LinkedIn or give me a call. My contact information is below. I’d be happy to discuss your project anywhere in the U.S. I can run your project throught this Tenant Improvements calculator and see what kind of results we might expect. Let’s maximize your tax savings on your building, project, improvements.

John Murphy CSSI

REALTORS Close More Deals and Earn More Money with Cost Segregation

REALTORS and Brokers who work with real estate investors should look at adding cost segregation as a service that you and/or your firm offers. It’s a fantastic service for your clients. (Here’s a 12 minute explanation how REALTORS can implement cost segregation into their business today). You’re going to make a lot more in referral fees from cost segregation than you do with your affiliated services for home warranties or insurance. You can earn 10% of the fee. If the study costs $2,500, that’s $250 for you just for referring us. You don’t have to be an expert. Let us handle it. We’ll run with it and pay you when the study is finished and we’ve been paid by the client.

Connect with me and let’s discuss. I work all over the county. I’m also a licensed REALTOR and have been since 2003. I’ve been a broker since 2007. I don’t do much for transactions any longer as my time and commitment is with cost segregation. So I’m here to be your partner. I know how hard you work and the value you try to deliver to your clients. This can and will help.

Reach out to me on LinkedIn.

John Murphy CSSI

AOC Leads $30B Homes Act Aims to Revolutionize Affordable Housing with Federal Social Housing Authority

AOC – Photo Credit: Kenny Holston/The New York Times

AOC launches $30 Billion Federal Bill to fund 1.25 million affordable housing units over the next 10 years. Rep. Alexandria Ocasio-Cortez and Sen. Tina Smith have just introduced this legislation to be considered by Congress.

If you thought building and investing in the affordable housing space was lucrative before, it’s about to go to a whole ‘nother level with this proposed legislation.

Washington, DC wants in the housing development game in a big, big way. Here’s Bloomberg’s take on it. Be sure to check out AOC’s office release from her Congressional Office.

The private sector apparently can’t get the job done but the government thinks that if it can print $30 billion that we don’t have, that they can make things better for people.

We all know how this works, right? This will be a big government give-away to friends of the government. Time to replenish the housing stock in Baltimore, Detroit, DC, Chicago, LA etc.

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