Ep. 14 | Unlocking Real Estate Through Cost Segregation Studies

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About the Guest: Heidi Henderson 
Heidi is a seasoned tax professional and the Executive Vice President at Engineered Tax Services (ETS). With over two decades of experience in the tax industry, Heidi specializes in cost segregation studies and various specialty tax services, bringing extensive expertise to real estate tax strategies. Her career is marked by a dedication to helping clients legally and ethically maximize their tax benefits through engineering-based solutions. She is a distinguished speaker and a prominent figure in the tax planning community.

Episode Summary:

In this illuminating episode of the Mr. R Show presented by the MRR Institute, hosts John and Chris dive deep into the world of cost segregation studies with expert guest Heidi Henderson from Engineered Tax Services. Designed for tax professionals seeking to scale their practices, this episode explores the significant tax benefits that can be realized through strategic cost segregation, an often-overlooked practice that can substantially enhance revenue by accelerating depreciation deductions for real estate investors.

With a focus on the practical application of cost segregation, the conversation covers the basics, real-world examples, and advanced strategies. Key asset classes such as short-term rentals, commercial properties, and more are discussed in detail, highlighting the potential for tax savings. The episode further uncovers how tax professionals can partner effectively with ETS to offer robust specialty tax services, efficiently handle complex filings, and ultimately provide enhanced value to their clients. Don’t miss out on this essential guide to mastering cost segregation and boosting your tax practice.

Key Takeaways:

• Cost Segregation Basics: A cost segregation study breaks down a property into various asset classes to accelerate depreciation deductions.
• Real Estate Professional Status: Taxpayers meeting specific criteria can significantly benefit from cost segregation by converting passive income to active, thus maximizing deductions.
• Short-Term Rentals: Properties with an average stay of seven days or less qualify for beneficial tax treatments, making them prime candidates for cost segregation studies.
• Retrospective Studies: Properties purchased in previous years can still undergo cost segregation, allowing for catch-up on missed tax benefits via Form 3115.
• Partnership with ETS: Tax professionals can enhance their service offerings and client satisfaction by collaborating with ETS for specialized tax services, ensuring legal and ethical compliance.

Notable Quotes:

1. "Applying cost segregation converts to the preferable method of depreciation." - Heidi Henderson
2. "Cost segregation is the lowest hanging fruit for any real estate investor when it comes to tax planning and strategy." - Chris Picciurro
3. "There are still tax preparers out there and bookkeepers and accountants that don’t understand the value, and it really does undermine the relationship with clients in the end." - Heidi Henderson
4. "If you have someone that is rep status, this cost segregation study is a juicy opportunity for them." - Chris Picciurro
5. "We do have all of the updated or revised appreciation schedules in our studies. We also will do the form 3115 so we can do the calculations." - Heidi Henderson

Resources:

• Engineered Tax Services
• Connect with Heidi Henderson on LinkedIn

• (00:07) - Scaling and Modernizing Tax Practices for Maximum Revenue
• (02:41) - The Benefits and Misconceptions of Cost Segregation Studies
• (07:05) - Simplifying Tax Deductions and the Importance of Documentation
• (07:37) - Accelerated Depreciation Benefits Through Cost Segregation and Bonus Depreciation
• (11:11) - Boutique Firm Brings Big Four Tax Strategies to Small Clients
• (13:11) - Maximizing Tax Benefits Through Cost Segregation Studies
• (20:09) - Tax Strategies for Real Estate Professionals and Passive Investors
• (27:32) - Tax Strategies for Real Estate Professionals
• (31:19) - Strategies for Maximizing Tax Benefits with Cost Segregation
• (37:34) - Short Term Rental Property Strategy and Tax Implications
• (38:08) - Cost Segregation Studies for Tax Benefits on Short-Term Rentals
• (46:50) - Specialty Tax Services and Energy Efficiency Incentives
• (50:15) - The Benefits of Cost Segregation for Real Estate Owners
• (56:05) - Scaling and Modernizing Your Tax Practice

Creators & Guests

Host

Chris Picciurro

Founder, MRR Institute

Host

John Tripolsky

VP of Marketing, MMR Institute

Guest

Heidi Henderson

Executive VP, Engineered Tax Services

What is The Mr. R Show?

The Monthly Recurring Revenue Institute provides industry-leading training and coaching to accounting and tax professionals that are committed to a healthy, profitable, and balanced life. Our commitment and focus are centered around teaching business processes that allow members to implement and grow a membership-based, subscription business model focused on value pricing.

Intro: 00:07

Welcome to the Mr. R Show, presented by the MRR Institute. This podcast is designed specifically for tax professionals looking to scale and modernize their practice by maximizing revenue through resources. Join us as we explore expert strategies, innovative tools, and actionable advice to help you navigate the evolving landscape of the tax industry. Whether you're aiming to grow your business or enhance your client experience, you're in the right place.

Intro: 00:35

Now, let's get to the show and transform your practice together.

John Tripolsky: 00:43

Everybody, and welcome back to the mister r show here presented by the MRR Institute. And today, I know this is a topic because me and Chris Piquero, who I will introduce him back to his own show here momentarily. You know, we gotta kinda keep him in a corner sometimes. We don't let him out right out of the gate, but we eventually let him into the race. So we've been at these events.

John Tripolsky: 01:04

So I'd say over the past, really, 3 months, me and him have been traveling really north and south, going to a lot of tax professional conferences. Anywhere from the Michigan Association of CPAs over to actually, I should say down to Orlando for Taxposium through NATP. All great events. I think it was a couple more in there. And it always seems like this topic comes up.

John Tripolsky: 01:26

So we're gonna focus a little bit on cost segs. But then, obviously, there's a little bit more to it as well. We obviously brought out a fantastic guest. And no, I'm not talking about Chris here. We gotta you know, we don't wanna give him a big head.

John Tripolsky: 01:38

He already lost his hair, the poor guy. The last thing he needs is is, you know, obviously, have a big head. He can't fit through the door. But without further ado, Chris Pacquero, welcome back, sir.

Chris Picciurro: 01:48

Gosh. With that inter the introduction, said we don't do this show once a week. Thanks, John. It's great to be back. And we yes.

Chris Picciurro: 01:56

You and I have been had had a had the fortune of being able to attend multiple conferences over the summer. And it's funny. We'd we presented to a variety of groups, each in about tax planning. 1 was a short term rental loophole explained. 1 was tax planning master class on how to monetize a tax return.

Chris Picciurro: 02:18

The one thing that was in each of these presentations when we would talk about case studies is the concept of a cost segregation study, and I think the cost segregation study is the lowest hanging fruit for any real estate investor when it comes to tax planning and strategy. Now we do talk a lot about ideas are cheap and implement implementation is valuable, and there's a lot of bad eggs out there, bad apples. Eggs and apples, I don't know. They're both they both could be bad. But I could just speak from personal experience in our private CPA practice.

Chris Picciurro: 02:51

Our guests today, I've been working with for multiple years, and they do an amazing job in making sure that our clients legally and ethically get the best result possible when doing a cost segregation study. So on today's episode, the listeners, we know you're tax professionals out there. Although we always say, just because you get paid doesn't make you a pro. What I want from you is to keep an open mind, to understand that none of us know everything. My niche is real estate, so I I deal with about a 100 cost segregation studies one way or another or proposed ones a year.

Chris Picciurro: 03:26

So we want you to be able to identify when you think you have a client that could benefit from a cost segregation study and the benefits of working with a with a partner. Because, ultimately, if for some reason they don't benefit, that's okay. You were the one that brought it to their attention. Then we're gonna find out also timing of what cost segregation study the timing of the cost segregation studies, and and we're just gonna, you know, we're just gonna talk through real examples. So without further ado and I'm so excited to introduce Heidi Henderson from Engineered Tax Service.

Chris Picciurro: 04:01

Welcome to the Mr. R Show.

Heidi Henderson: 04:03

Thanks, Chris. I always love joining you and John. You guys are

John Tripolsky: 04:10

amazing and have been wonderful partners for the last few years. And, you know, this is this is such

Heidi Henderson: 04:10

a fun topic. I agree. It's the love hanging fruit, and it's one that we still see as missed more often than, I I can fathom at times. I'll tell you one really quick story before we dive in. This used to happen all the time, but I had a client it's been a while.

Heidi Henderson: 04:32

I had a client I was talking to the other day, last week, I think, and and he had somewhere, his buddy had told him about cost seg. Buddy has real estate. He has real estate. He says, you are you're you're doing cost seg on your properties. Right?

Heidi Henderson: 04:44

And he's, well, I never heard of it. And, long story short, the guy calls me. We're having a conversation about it. He says, well, I'm just, you know, a little bit unclear because I talked to my CPA, and my CPA said, no. You can't do that.

Heidi Henderson: 04:56

That's illegal. And I I was like, oh, oh, well, you know, we'd love to have a conversation and be happy to share all of the IRS guidance and the guidelines as to what this is. And that the phenomenal thing is the audit guidelines actually say in them that applying cost segregation converts to the preferable method of depreciation. So, actually, it is the proper way to do it. But the IRS just says, look, we're not gonna force you to have to go out and pay for a study.

Heidi Henderson: 05:32

So if you don't want to, fine. Take your standard deduction, your loss. And that's the funny thing. So I just had to start off with that, that, you know, there are still tax preparers out there and bookkeepers and accountants that don't understand the value, and, it really does undermine the relationship with clients in the end. So fun topic, and I can't wait to dive in.

John Tripolsky: 05:52

The heck of the IRS has ever given a green light for something. It sounds like that might have been it right there.

Chris Picciurro: 05:59

Well, I mean, as a tax professional, we're in my opinion, it's our obligation to do what's best for our clients, and and this strategy is is probably my favorite. Top 5 for sure, because there's so much flexibility to it. And, Chuck, I can't wait to talk about that. But, Heidi, can you start by you know, obviously, our our audience is and you've been an amazing guest on our other our sister, podcast, Teaching Tax Flow, which is for taxpayers. This one's obviously for tax professionals.

Chris Picciurro: 06:30

Can you give the the listening audience a a 30,000 foot view of what a cost segregation is. Yeah. Absolutely.

Heidi Henderson: 06:40

I'll give you my little rundown. I try to make it as simple as possible. What I tell taxpayers is it's very similar to whether you take a standard deduction or you itemize your deductions. When I tell my kids, when my kids were really young, you know, and they're 18, 19, 20, and they were starting to have to they were independent finally. Filed their own tax return.

Heidi Henderson: 07:02

You know, take a standard deduction. It's fine. But as you get a little bit more mature or you have some business activities, obviously, if you itemize, you may have a much larger deduction. The caveat is you have to have some support. You have to keep your receipts.

Heidi Henderson: 07:18

You have to document. What are those costs? How did I come up with this? Because the onus is on the taxpayer. Right?

Heidi Henderson: 07:25

It's their responsibility to be able to show those things. Cost segregation is providing an alternate method of depreciation and it's using MACRS instead of straight line. So the straight line depreciation, commercial property is over 39 years, or for residential 27 and a half years. When we shift to the MACRS method, it's the accelerated class recovery system. That is, again, actually the preferable wet method for depreciating real estate because we're actually going in and creating an itemized deduction to look at every single component of the building, everything that was inside.

Heidi Henderson: 08:04

We're not just simply making the assumption that a client bought asset a. It is this, you know, we'll use a rental home as an example, asset a for $400,000 and now we're gonna depreciate that over 27 and a half years. That's your standard deduction. But the cost seg is going in and saying, well, we know that carpet, it shouldn't be depreciated for 27 years. I mean, if it last 27 years, that's that's just gross.

Heidi Henderson: 08:34

So first off, we need to look at the actual useful life for the assets that that this taxpayer just acquired. That's why it's the prefer preferable method because when we look at that, well, we know that they bought a dishwasher and a refrigerator and, multiple other appliances, probably some carpeting and some fixtures, a number of things in that property that will fail and have to be replaced over a shorter period of time. Therefore, the cost segregation is gonna go in and define the value of every single piece of that acquisition, and then put it in its appropriate and correct useful life category. That then allows the taxpayer to take a faster accelerated deduction as well as then qualify for bonus depreciation, which is applying to everything shorter than 20 year useful lives. So nothing building related, but everything that's personal property or land improvements all fall into that bonus depreciation category.

Heidi Henderson: 09:39

So, really, the the benefit in the 1st year with bonus is so significant that the, you know, the benefits to the client are really dramatic and, and is well supported by the IRS as well.

Chris Picciurro: 09:52

Well and that's the thing is I know with Tax Cuts and Jobs Act, which we're gonna jump into in a little while because of bonus depreciation, cost segregation studies got to be so popular. But, ultimately, we've been using these studies for over a decade, because especially on commercial property instead of writing it off or deducting it over 39 years. And and, yeah, that's a great way to look at it is ultimately when you purchase real estate, there's personal property located in that real estate, and you have to you have to do something in an IRS compliant fashion to break that that portion out to get the to to accelerate the depreciation for that those asset classes. Then the bonus depreciation is just been the cherry on top of it, really.

Heidi Henderson: 10:34

Exactly. That's what I've said. It's like we got a steroid injection. I mean, you like, the concept of cost segregation, it's actually been around for over 30 years. It's been applicable, widely used even by the big four firms of large commercial projects.

Heidi Henderson: 10:50

One of the things that we've still seen carry through the accounting industry is the older concept that cost segregation is very expensive. And second, that it really is only beneficial on very large commercial properties, large hotels, giant sky rise multifamily buildings. And that used to be the case. That's exactly why our founder started this company 25 years ago. He was working for a big four firm.

Heidi Henderson: 11:20

And he says, wow. These taxpayers and investors are able to apply this strategy that is so significant in terms of reducing their income tax liability and helping them then increase their wealth and their generational wealth and their personal, portfolio, why can't we just do the same thing? Let's create a boutique firm, and we'll serve small to midsize clients. Because if we do that, we have that same expertise. So we started to pull people out of big 4 firms that were doing this work, taking it to the marketplace where we could apply the same strategy.

Heidi Henderson: 11:57

And to your point, bonus depreciation essentially gave it a steroid injection. Because what happened is over time in the market, we've seen, as with all things, this digital transformation. We're seeing technology. We're seeing innovation and automation. There are some dangers to that because I think we all are exploring where's the where's the middle ground between still having high level white glove service doing something correctly, I love your phrase legally, ethically, and looking at the data, but still being able to to use efficiencies where we can to keep the price points reasonable so that it's applicable for all taxpayers.

Heidi Henderson: 12:42

That is really that coupled with bonus depreciation is what has shifted the market to making it applicable to even single family homes, short term rental properties for every taxpayer out there that's buying a small investment property. It still makes sense to utilize this type of study. Whereas 4, 5 years ago, we would have said, yeah. Once you get to a 1,000,000, 1,000,000 and a half, maybe $2,000,000, that's when it makes sense. Now that's Right.

Chris Picciurro: 13:12

And when we think about

Heidi Henderson: 13:13

it because we're really seeing an applicable on all

Chris Picciurro: 13:16

residential properties

Heidi Henderson: 13:17

and almost every day.

Chris Picciurro: 13:18

And a half year life and commercial's 39. And we do know that we get a step up in cost basis, upon death. However, think about how much depreciation deduction is never taken because a taxpayer passes away. I mean, it's amazing. So so cost segregation studies, what they're doing is they're breaking out the personal use portion of of real estate.

Chris Picciurro: 13:44

And anything Tax Cuts and Jobs Act and beyond, that that breakout is eligible for bonus depreciation. Excuse me. What are some of the, you know, the major asset classes and you that you're seeing now? I know you mentioned previously it was a $1,000,000 plus properties, but a a lot I I would imagine a lot of short term rental property owners, and then we can start talking about because the cost segregation study actually accelerates the depreciation deduction. And then for some taxpayers, they could take that deduction immediately or they can offset income for the next 5 to 7 years, which are both really nice benefits.

Chris Picciurro: 14:20

But yeah. So what are some of the asset classes that you're seeing, the most right now?

Heidi Henderson: 14:32

Oh, yeah. This is a fun conversation. Mhmm. Oh, yeah. I always ask people, so have you noticed there's a new car wash on every corner in your town?

Heidi Henderson: 14:43

Well, guess why? So, bonus depreciation, when I mean, it gets me back up a little bit. The IRS writes tax code to incentivize certain activities. And bonus depreciation, what was happened in Tax Cuts and Jobs Act, was that we had bonus for year for 10, 15 years, we've always had bonus. But that was applicable to new construction or newly acquired asset.

Heidi Henderson: 15:14

So when somebody bought an existing building, it didn't qualify. The Tax Cuts and Jobs Act expanded the definition and allowed it to then apply to used property. And so then taxpayers began to realize that they could buy an existing commercial or residential property, and then they could do the cost segregation, and bonus depreciation applies at a 100% in previous years. From 2017 to 2022, it was a 100%. So a 100% of that is deducted immediately in year 1, and the taxpayers offsetting, you know, maybe all of their income with that deduction.

Heidi Henderson: 15:52

So the ROI on the purchase of a building, all of a sudden, the game completely changes because of how much they're saving on the tax side and then converting that into a real estate investment. Because of that, it is driving specific sectors in the real estate markets that we've probably all seen shift in our local communities because specifically of bonus depreciation. One of them, certainly short term rentals. And we can dive into that a little bit if you want, but short term rentals is really then getting into the short term rental loophole and active. The the wrench hold through active participation is entirely different and much easier with short term rentals.

Heidi Henderson: 16:39

So we've seen a massive increase in the acquisition of those property classes. And then on the commercial side, car washes, those car washes, I don't know. What is it? Quick quack or whatever. And, you know, wow.

Heidi Henderson: 16:54

And those ones we see that are the drive through type, drive up, pay at the kiosk, and drive through the thing and drive out. Those are considered equipment rather than commercial real estate itself. So they the entire building is treated either 5, 7, or 15 year property. All of it then qualifies for bonus depreciation. You can have an investor that then goes out and buys a 2 or $3,000,000 car wash, take out your land allocation, maybe call it 20%.

Heidi Henderson: 17:24

The remaining is completely deductible with bonus depreciation. So someone who has a high tax liability is utilizing that for a full offset of their, their their gross income that's reflected on the tax return depending on their tax situation. So car washes. Another really significant class, is self storage. I have personally invested in self storage.

Heidi Henderson: 17:51

It's a great class, vertical. It does extremely well in terms of returns. Those properties are older drive up metal buildings, not the newer multilevel concrete, you know, climate control. Those those are more like standard commercial buildings, but those older style self storage properties are really, really,

Chris Picciurro: 18:16

Mhmm.

Heidi Henderson: 18:16

Yep. Impactful from the depreciation standpoint. Mobile home parks are another one. See a lot of demand for mobile home parks because it's mostly land improvements. Again, mostly deductible.

Heidi Henderson: 18:30

And then other ones are freestanding restaurants. The IRS has a special depreciation rule for freestanding restaurants, like fast food restaurants, and they also are treated as 15 year property. And so the entire property can then be deductible. So those are some of the the verticals we've seen because of bonus depreciation. A lot of investors are pursuing those directly for the tax benefits.

Heidi Henderson: 18:59

And then aside from that, the standard asset class is still performing incredibly well. Multifamily properties, multifamily value add properties, buy more properties, massive value add, which then has a whole another aspect. I mean, then we really dig in deep with paying off all the things you're demoing and you're taking out when you do a renovation. The the write offs on those are huge. So it just goes across the board.

Heidi Henderson: 19:26

There there's not property class we don't touch with the cost seg study.

Chris Picciurro: 19:31

Yeah. I know that and I've seen, some gas stations, convenience stores. I believe that's a lot of 15 year asset class. So there it it really runs across the the gamut of all these asset classes that could be beneficial. Now you can we'll talk about timing in in in just a few minutes.

Chris Picciurro: 19:51

So, obviously, we understand what a cost segregation study is. Let's talk about the typical taxpayer that's gonna benefit the most from it, which I look at it as you've got different buckets of people. Right? You're gonna have, 1, your real estate professional status person. 2, your short term rental property operator that that manages their own short term rental property.

Chris Picciurro: 20:16

3, you've got your business owner that that potentially buys an operating facility for their business. Let's say you own a veterinarian clinic and you and you per instead of renting, you build a clinic. And then 4, you have people that have passive income, that just wanna offset that income. They don't necessarily need to offset other active income, so they're passive investors, but they like that immediate deduction to be used in now or in the near future. In that category, I think, is very underrated.

Chris Picciurro: 20:45

I feel like, you know, you've got let's say let's say you have a passive investor and someone buys a property, and let's say they're a high you know? I'll give you an example of, let's say, it's a medical doctor, and they buy a $400,000 single family home, and they're in the 40% marginal tax rate. Let's just say with state and federal. Well, if that if I told someone that, hey. You're gonna buy a property.

Chris Picciurro: 21:09

You're gonna get an 8% return. You're gonna and it's gonna be tax free for the next 10 years. That's very attractive. So even though they do the cost segregation study, let's say a passive investor, and they get this big deduction today, to being being able to use that over the next 8 to 10 years could be very attractive.

Heidi Henderson: 21:30

It you know what? It's it's I I love that you brought that up because we we do actually have a number of CPAs and tax professionals who still will look at the opportunity. You look at opportunity, look at, like, we'll run a proposal for a client. They'll take it back to their CPA for review. And then the comments are, well, it's all passive.

Heidi Henderson: 21:51

It's not gonna offset your w two active income because you're a passive investor. There's no value to doing cost segregation. And there are some cases where that may be true. If their standard deduction is already offsetting all of or any passive income that they have, they may not need to utilize the the cost segregation and accelerated depreciation. However, most of the investors I know, they don't just have one property.

Heidi Henderson: 22:19

They have multiple properties. They typically have other investments. They have other things that they are doing. And a lot of times they tend to be moving things. So they've bought something and then in a tax year they're selling something.

Heidi Henderson: 22:32

That sale is then creating capital gain, it's creating a taxable event. What a lot of people are are neglecting to think about when we look at utilizing the study even in a passive setting is that that depreciation it it you don't lose it if you can't use it immediately. It becomes a bucket or there's a few different ways to to phrase it. It can be a net operating loss or carry forward loss. It can also be called a suspended loss.

Heidi Henderson: 23:06

So we have this sort of suspended loss that's hovering out here. It's essentially waiting to just jump in and offset some income when it occurs. So when that taxpayer sells an asset or they have some other gain type of a situation on their return, that is going to offset that, and they'll be able to use that depreciation. So they just create this this sort of, bucket of deductions they're always able to pull from, and to your point, offsetting any of that rental income or other rent rental income potentially from other properties that they can utilize that.

Chris Picciurro: 23:45

Right. I mean, a lot of times, we I don't there's different terms for this, but let's say a 10 30 one exchange doesn't work for you and you're selling a property. Even if you're a passive investor, this could be used to offset a lot of that gain from the sale instead of kinda getting into a 10 30 one exchange if you don't want to be in the 10 30 one exchange, if that makes sense, if they're both passive activity.

Heidi Henderson: 24:10

Yep.

Chris Picciurro: 24:10

So that so that that's that's the one that is always I mean, when I think about someone that's in that marginal tax rate and and they're saying 8 per you know, in my example, that's an attractive 8% tax free is pretty darn good.

Heidi Henderson: 24:23

Well, Nick

Chris Picciurro: 24:24

Probably the biggest impact, though, immediately would be someone that's a real estate professional status. And I know we talk about well, we really haven't talked about that that much in this pod in the mister r show, but, a taxpayer that's reps we call rep status, right, real estate professional status, is gonna be someone that in general has meets a 750 hour, mark, meaning you're in real estate trades or businesses for at least 7 100 50 hours for the year, and it makes up more than 50% of your professional time. And if you're if you're a real estate professional, then what happens is real estate investing and rental properties is you you you I don't wanna say you skirt the the rules, but you're it's not considered a passive activity anymore. And for those people so if you have those people on your book of business and you were doing preparing tax returns for those folks and they own rental properties, this is a this cost segregation study is a is a juicy opportunity for them. So

Heidi Henderson: 25:28

Yeah. Yep. Well, you know, if you'll humor me for a second, I'll tell you a story. California. We love California.

Chris Picciurro: 25:37

Oh, yes.

Heidi Henderson: 25:39

Some of these poor poor successful people in California, can be under the pains of significant tax liability. I had a situation with a gentleman I was chatting with. He's an attorney. He's doing very, very well, making well over 7 figures a year. And they were at a 52% tax rate.

Heidi Henderson: 26:03

So just just imagine here. He's he's paying a lot in income taxes, federal, state, and, you know, other you know, the other things that get tacked on in in that area. He had 7 investment properties. I think 5 were short term rentals and, 2 other kind of commercial buildings or something. He had never looked at cost seg.

Heidi Henderson: 26:29

It was all passive as the way it was currently situated. His CPA had not mentioned the strategy at all. We started to dig into it a little bit, and I said, we ran the numbers on his properties, and I said, this is gonna generate if we do the cost seg on your 7 properties, it's $1,400,000 of depreciation for this year, this tax year. It would literally put $600,000 of cash back in his pocket to just simply take and buy another property. There's a down payment to the next property and just continue to roll, roll, roll.

Heidi Henderson: 27:05

The issue is he's got a w two from his law firm, and, you know, it's, it's passive activity. So I asked him, I said, well, does your are you married? And he says, yeah. And I said, okay. What does your spouse do?

Heidi Henderson: 27:17

And he says, well, she's a teacher. He says, but, actually, she's just a part time teacher. She just likes to volunteer and do substitute teaching from time to time. Not very much. And I was like, okay.

Heidi Henderson: 27:29

So how much did she make last year? And he said, she made 30,000 last year. And I said, and how involved is she in the real estate? And he said, quite involved. She manages a few of the property, but she's interested in doing more.

Heidi Henderson: 27:44

Okay. Beautiful. Great great situation. So here's the deal. Her making $30,000 a year is costing you $600,000 this year.

Heidi Henderson: 27:54

So how about she drops the substitute teaching job, she can go volunteer at the school whenever she wants and don't get paid for it? Because it will save you a half a $1,000,000. She can become a real estate professional, she can manage the properties, utilize it, convert it into active activity. And there you go. Continue to build her portfolio.

Heidi Henderson: 28:15

They were flabbergasted at the potential upside, and and it with one simple action that they were not far from now. Obviously, not everyone can do that, but we are dealing with taxpayers on a regular basis who want to shift more into real estate investing and building passive income, and they're open to these ideas. Some of them are looking at ways to actually get out of their day job. I chatted with another guy who's he's actually in software. He's a software developer.

Heidi Henderson: 28:47

He works for a big tech firm in San Francisco. He's making lots of money. He's doing great, and he hates his job. And he was like, I'm so burned out. I'm so bad with it.

Heidi Henderson: 28:57

I don't wanna do this anymore. I'm starting to buy real estate. I really wanna be able to now take all the stuff I've been able to earn and take my portfolio and start to invest. And what does this look like? Then I think this is such a huge opportunity for tax preparers to really understand how to have the conversation with their clients and help them decide what are they looking to accomplish in their life and professionally.

Heidi Henderson: 29:24

Because this is really a tremendous strategy for helping people in this situation be able to look at opportunities to change their life. And that's I mean, it sounds you know, sometimes I'm like, okay, sounds a little cheesy. But to be honest, I have worked with clients who are in that situation and have built their portfolios and changed their lives, and I think it's amazing.

Chris Picciurro: 29:47

Well, absolutely. And that's something to remember when you're looking at your client's tax returns. So we're gonna get into timing a little bit in a minute. You made a great point. That that case that you're working on from California, even though the spouse was not rep status the year they put the asset into service, the rep status is a year by year test.

Chris Picciurro: 30:06

So if she wants to take 2024, 2025, and pour in a real estate and give it a real chance and be a real estate professional status that year and benefit by $600,000, and then in 2026, a year later, she's just like, this isn't for me. I wanna go back to teaching. That's okay. You know, it's not like you're you have to prove rep status every year. It's it's a snapshot of that given year.

Chris Picciurro: 30:33

And for someone that that, you know my wife's a teacher, so they they put a lot of work in for for not as much compensation as they deserve. But for this lady to base it would take her 20 years to make as much money as she can make by being a rep status for 1 year.

Heidi Henderson: 30:51

Exactly.

Chris Picciurro: 30:52

And, you know, that's that and and it's nice because she could really plan on it. And in that case, you know, who knows what this I love pairing cost segregation studies with other strategies, but, like, for you for the tech guy, I mean, if he's making if he's paying over 50% tax, I'm guessing, yeah, he's making over $600,000, but what happens if these costs what if they acquire a couple properties and their cost segregation studies actually are more than their income? You've got a couple options. The option I like the best is just to do a Roth conversion tax free. The other option you have is you don't have to take this happens I find it, Heidi, with some of the short term rental operators because some of these folks are in that range of, let's say, 200 to $300,000 of w two wages.

Chris Picciurro: 31:36

They buy maybe a 8, $900,000 property, and the cost segregation study comes in so high that it wipes out all their w two wages Yeah. Which seems great, but you really don't wanna be not using your standard deduction and using that 12% marginal tax rate and not taking advantage of your child tax credit. So sometimes you might yeah. It's almost like, hey. We only needed one run, but we hit our grand slam and we got 4 runs.

Chris Picciurro: 32:01

Great. I'm not gonna complain. But in that case, you could always pair it, with the Roth conversion. Or if the cost segregation study comes in after the end of the year so it's too late to go back and do the Roth conversion, you don't have to take bonus depreciation on all asset class levels. In other words, we've, on our client basis several times, said, man, this cost side came in so well.

Chris Picciurro: 32:24

You know, ETFs did too good of a job, I guess, and I'm gonna elect out a bonus depreciation for the 5 year asset class, and I'm gonna take it on the 7 and 15. And now that client has even additional deductions for the next few years. So really gives you a lot of opportunity even if that deduction comes in, really high.

Heidi Henderson: 32:46

Yeah. You know, it is a great point because some taxpayers get a little bit nervous when they're doing a cross seg, they run the numbers, and they're like, wow. My tax return shows I had a negative 475,000. You know? It's like a Right.

Heidi Henderson: 33:01

It's like a huge, massive negative number on their return. And I'm like, that can't be good. This is gonna make the IRS take a double you know, do a do a double take. Now I wanna caveat this that we have not seen much scrutiny with the IRS. IRS because segregation is not a heavily audited item.

Heidi Henderson: 33:20

In fact, it has automatic consent. It has automatic approval and prior consent for a form 31 15. You know, it's something again, it's a preferable method for depreciation. So it's quite common now that we're seeing losses with people who have real estate because, I mean, this is just this is how real estate works. But to your point, there are not very many tax preparers or individuals that are aware of the fact you have exactly what you said.

Heidi Henderson: 33:47

You don't have to actually take the full bonus. The other issue I actually don't know what it is right now. We're at 60% bonus depreciation right now. We do expect it will be extended sometime early next year, hopefully back to a100 percent. But when it was 100% before, you can elect to claim 50% bonus and then take the remaining 50% over the 5, 7, 15 year class lives.

Heidi Henderson: 34:12

So it's still a lot of accelerated benefits. You could, to your point, elect out of bonus altogether and just simply take the accelerated 5 year property, still really significant tax benefits. And you could do it what Chris was suggesting, choose by asset class and apply bonus to 5 here and not to the other ones. So there are a lot of workarounds or strategies for how to best apply this in a situation that's gonna work for that particular taxpayer.

Chris Picciurro: 34:42

Absolutely. Be because there's just it's a case by case situation. I mean and we don't know what's gonna happen with bonus depreciation. We can touch on that in a minute. I do have a question for you just so because I was just thinking, we take for granted because you and I look at these all the time.

Chris Picciurro: 34:57

Mhmm. What could, if you're working with a taxpayer and and you're you're a tax professional, in general, you know, what are they looking at as far as 5, 7, and 15 year asset class eligible or bonus depreciation eligible asset when it comes to a percentage of the of the property. So let's say I know it depends on type of property, but let's say someone buys a commercial building for $1,000,000. Let's say that 20 percent's land, just what if, obviously, depends, and you've got $800,000 worth of building asset. What's the range typically that you're gonna see that's eligible for bonus depreciation?

Heidi Henderson: 35:35

Yeah. That's a good question. So in that scenario, let's say we've got a $1,000,000 purchase. We're allocating $200,000 to land. That gives us a tax basis of 800,000.

Heidi Henderson: 35:46

We'll call this an office building. So we've got some office build out, maybe multiple tenants in a larger property. At 800,000, we're probably gonna pull, you know, kinda depends, but probably between 253030 plus percent. So let's just conservatively say it's 27%. That equates to about $216,000 that drops into 5 15 year categories.

Heidi Henderson: 36:14

5 year being personal property, so interior finishes and fixtures. 15 year property is outside exterior land improvements, So parking lots, landscaping, signage, lighting, anything outside the building. So combined 216,000. When we have a 100% bonus depreciation, that results, know, a $1,000,000 purchase is a $216,000 depreciation year 1, then just depending on what bonus depreciation is for the given year. So it's kind of a ballpark for that type of property.

Chris Picciurro: 36:46

Right. No. That's I'm I've been using just a rule of thumb, 25% is eligible for the bonus depreciation. I like I usually, they come in a little higher. Obviously, there are a lot of factors involved.

Chris Picciurro: 36:57

So Yes. We talked about rep status people as really the lowest hanging fruit if you're if you're thinking about your tax book of business. Short term rental property operators. We I touched on that a little bit, but there's a concept, if you haven't heard of it called I don't know if I love this term. I like the short term rental property, strategy.

Chris Picciurro: 37:17

Some people call it it's commonly referred to as a loophole. And, ultimately, if you have someone, that is operating their own short term rental property, so so from a technical perspective, they have what's called material participation in the property, and the property qualifies as a short term rental property. In general, it's average stay of 7 days or less. There's a rare exception of 30 days or less if you, have substantial services, which is, like, 1% of the time, especially for people as you know, like, a lot of the people in California might buy something in Scottsdale, Arizona or in Lake Tahoe or in the you know, we even have operators in the Smoky Mountains and and that sort of stuff. So if they're operating their own short term rental property, a separate set of rules comes into play where that property is not considered, It's considered nonpassive, and it's considered a commercial property.

Heidi Henderson: 38:08

Yep.

Chris Picciurro: 38:09

So where and it used to be, like I said, it had to be a $1,000,000 property or more. Assuming that they purchased the property before 2022 at the 100% bonus depreciation, what are you seeing as the price point is where where it might make sense for them to look at a a cost segregation study on a on a short term rental?

Heidi Henderson: 38:28

Yeah. Yeah. It's it's a great question. On the short term rentals, to your point, now all of a sudden, it makes so much sense to do cost seg, whereas 4 or 5 years ago, we just didn't see it applied nears off. But, you know, pricing is more reasonable.

Heidi Henderson: 38:46

Bonus appreciation, of course, is creating such a big immediate tax benefit. We are doing cross segregation on everything from a $150,000 properties up to a1000000 and everything in between. I mean, it's really looking at the taxpayers' income, what their effective tax rate is, and how much they can really use. So we'd like to look at it. Again, if we go back to the same percentages we were discussing on the commercial property example, maybe we're gonna pull about 25%.

Heidi Henderson: 39:19

Typically, we're gonna be between 25, 30% on a single family home. So let's call it 25% pulls into personal property. If that's the case, again, if a $100,000 basis, that's gonna pull them, you know, $25,000 deduction. That doesn't seem like much. Some taxpayers I work with are really high end, and they're like, well, based on my effective tax rate, who cares about that?

Heidi Henderson: 39:45

But I work with some taxpayers also who are like, hey, this is gonna save me 8 or $9,000. Done. Absolutely.

Chris Picciurro: 39:52

Right.

Heidi Henderson: 39:53

You know, this that's cash in their pocket to, you know, make some improvements or do some things in the home. So in those situations, what we do is we have a very detailed benefit analysis even on smaller properties and some people will say, well, I don't know if it's worth that and I don't, you know, I don't know if it makes sense. So look, It's easy enough for us to look at the details of the property and get you an estimate. Not so much because then you feel obligated to me. You know what?

Heidi Henderson: 40:20

Honestly, I want what's best for the taxpayer. So let's run the numbers so they can make an educated decision and really understand if it's gonna make sense. We run the depreciation estimates, the projections, and then the CPA, ideally, your tax preparer can take that information and plug it into their sort of projected income and what the tax year is looking like and and really see what is the bottom line difference that is it's gonna, mean for this particular client.

Chris Picciurro: 40:49

Right. And that's the thing is when you're working with a 3rd party that is very reputable like an engineer tax service. And you're a tax professional. I think a lot of tax professionals are reluctant to do the cost seg because they're afraid, like, they have to figure all this stuff out. No.

Chris Picciurro: 41:05

No. No. They give you the depreciation schedule. You just put that and put it take them, put it in your tax preparation software. Yeah.

Chris Picciurro: 41:11

Which is a good segue to where I I love to find properties that were purchased in previous years that you can do cost segregation studies on. And that's something to remember that we talked about that rep status or that short term rental loophole qualification. Those are annual those are those are or or if you sold a rental property with a and you're a 100% passive, those are year to year analysis.

John Tripolsky: 41:39

That's it.

Chris Picciurro: 41:39

There are several times we look at a tax return. Heidi, I know you and I have looked at some mutual clients' tax returns where they've they've purchased property over the last 5 years and had no clue what a tax what a cost segregation study is. Not that their tax professional was bad. The tax professional is more of a generalist and just didn't work in real estate field. And we can go.

Chris Picciurro: 42:00

And even if they didn't have the rep status when they bought the property or operate the short term rental property when they bought the property or placed it into service, but they're doing it now, You could actually go and run a cost segregation study for 2023 or 2024 depending, you know, if you're on an extension, even if you bought that property in 2021. I just that just floors me, but that is a huge value add. And and, can you kinda talk about what we should be looking for as tax professionals in that case?

Heidi Henderson: 42:30

Yeah. Oh, absolutely. That's one of the beautiful things I mentioned, that the IRS has provided prior consent and automatic approval for a form 3115. That is a change of accounting method. It is prior approval.

Heidi Henderson: 42:46

It's it's consent because it's a timing difference. And so the IRS, you know, they allow those to be filed. It's something that allows for us to apply cost segregation, change the depreciation method on any asset at any time. So it's not subject to the 3 year look back rule. It doesn't require amending prior returns.

Heidi Henderson: 43:06

It's really just identifying that there's a property that the depreciation can be optimized and the taxpayer chooses to use the make Earth's depreciation versus straight line. And so we calculate the difference. And to your point, our I I appreciate you saying that it can be a little bit scary for CPAs who haven't been through the process because they're like, well, okay. Fine. My client does this, but then what do I do?

Heidi Henderson: 43:28

I don't know what to do with this. We do have all of the updated or revised appreciation schedules in our studies. We also will do the form 31 15 so we can do the calculations. So so making the change is a very easy process on the tax preparation side, that can be applied on any of those kind of retroactive projects. What you should be looking for as a as a tax preparer, if you see a depreciation schedule with an asset that's, you know, a 100, 200, 300 plus 1000 basis, and it says building straight line 39 year, or building straight line 27 and a half year, it should be looked at.

Heidi Henderson: 44:11

Now, within reason, I usually say usually about 10 years back. I mean, beyond especially if it's a single family. You know, rental property depreciating over 27 and a half years. If it's older than 10 years, they've already depreciated over half of the asset or close to. So we're usually saying, look, somewhere in the 10 last 10 years, if you see an asset, not only just the building, but also improvements.

Heidi Henderson: 44:35

That's what I see all the time. It's like, here's the building, here's the land, here's improvements. Building, $860,000 straight line, 39 year. Improvement, 672,000 straight line, 39 year. Like, it is a shame that that is on that taxpayers tax reader.

Heidi Henderson: 44:55

Because the opportunity that lies in those the the the purchase and the improvements that are sitting on that depreciation schedule is tremendous. And for a taxpayer to catch that, oh, I mean, it's a matter of looking at it going, oh, we should take a look at this one. Get a proposal. You save your client couple $100,000, and I can tell you who's gonna be their biggest hero.

Chris Picciurro: 45:16

You are. I mean, you have a client

Heidi Henderson: 45:19

Oh my gosh. My CPA is amazing.

Chris Picciurro: 45:22

Yeah. Where would they be without without you? You know? And and I would argue so for I mean, it's such low hanging fruit, and and if you don't be afraid of this. I mean, like I said, you the the you'll get a report as a tax professional with a 31.15 adjustment, and and and it's it is where the first time you see first time you see a property with, like, a minus $300,000 on a schedule e, you're kinda like, oh, boy.

Chris Picciurro: 45:48

But, ultimately, we talk, you know, in our practice a lot that tax laws are written to encourage and discourage certain behavior, and the IRS really sets the blueprint out for us of what what's tax, what's encouraged, and what's discouraged.

Heidi Henderson: 46:02

Then

Chris Picciurro: 46:02

And the fact that they give the IRS gives you an automatic, I mean, an automatic approval to change your accounting method instead of applying for it. They've seen enough that they said, yeah. This is we're not making up phantom deductions. All we're doing is properly allocating the purchase of the of the property to the proper asset classes. That's it.

Chris Picciurro: 46:24

And and it's something that you should really consider for for your clients. So and not only are you adding value to the clients, on the cost segregation study, once you start working with a specialty firm because I mean, shoot. I've been doing this for over 20 years as a as a tax professional. I don't know enough about cost segregation studies, research and development credits, and and and some of these other specialty tax services. And I know we were lucky enough to have Julio from ETS on a previous podcast talking about specialty tax services.

Chris Picciurro: 46:56

So check that out and get your free CPE if you missed that one. But, you know, there are so many things that that a specialty tax firm can uncover even during a cost segregation study. I know I do. For us, we had a client that was doing a cost segregation study, and you uncovered the 45 l and the 179 d deductions in in in tax benefits that I didn't even Mhmm. Think of in this project.

Chris Picciurro: 47:26

So can you kinda maybe I know there's a cost segregation study, episode, but sometimes you guys discover some other things within a building or a project that could benefit a a taxpayer.

Heidi Henderson: 47:38

Yeah. Absolutely. That's one of the things where, you know, we're not just a cost center firm. We are an incentive space specialty tax provider. So we have a number of different tax credits, deductions, and incentives that we're always look trying to strategically identify and assist clients with wherever we see an opportunity.

Heidi Henderson: 47:58

2 of those that that directly relate to real estate are the 45 l tax credit and the 1.70 9 d deduction. And both of those relate to real estate. They're both for energy efficient buildings. We see them most applicable when it's either new construction, so someone's actually building something ground up. There is some application for renovations, but a little bit harder to get those to apply on the renovation side.

Heidi Henderson: 48:26

So for tax preparers who have someone who's building a home or building a building, a multifamily building, an office building, whatever it may be, we always look at that. If we see it's new construction, we're also gonna give them information that they may qualify for additional tax deductions or credits, for that particular building in addition or over and above the cost segregation value. The 179 d is a deduction that is for commercial any type of commercial building, and it starts at 50¢ a square foot and goes all the way up to $5 per square foot. I have a client I just spoke to today just built a 18,000 square foot retail little strip center, and that will qualify for 1.70.90 at the $5 per square foot. And so it's a great, I think, what is that?

Heidi Henderson: 49:17

A $90,000 $60,000 deduction? 90. And, you know, great additional deduction 1st year that he's able to tack on to the benefits of the cost segregation. The 45 l credit is very specific to housing. So that's multifamily, apartments, condominiums.

Heidi Henderson: 49:36

We're looking at that on, on on either individual or multifamily units, and it's a tax credit that's anywhere from $500 up to $5,000 per unit on any of those projects if they meet the energy efficiency requirements. And so as an engineering firm, we do the energy modeling and the certification on those. There's also a specific tax form for 179 d, so similar to cost seg. We perform the analysis. We actually complete the this tax form that is required for that.

Heidi Henderson: 50:08

And then that goes back to the CPA. So it makes it much easier to be able to apply that, enroll it into the overall tax package.

John Tripolsky: 50:15

Heck, Heidi. I feel like I need to reintroduce myself. I've been sitting here in silence the whole time. And you know what's funny about these episodes and these topics, right, is I go through more sticky notes. So let me, for anybody that might see this, it's like I'm, like, making it rain sticky notes here with just ideas.

John Tripolsky: 50:34

Here they come. Look at that. I got, like, 12 of them. So I and I say this from the, you know, the peanut gallery as I say now. So everything you guys have talked about.

John Tripolsky: 50:44

Right? Something kind of a a reoccurring comment comes up is somebody didn't know or, you know, there's this opportunity that's just kinda lingering out there again that some people may think is too good to be true. This is almost the way it the way it sounds. They don't know it exists or they the tax pro might know it exists knows knows it exists, but they really don't know the next steps to take. Yeah.

John Tripolsky: 51:10

And, Chris, it it was either you earlier on it. How do you see you said it too is, you know, really by offering this and being confident in offering cost seg specifically, it's such a a bonus. Right? It's it's a it's a value add. It's a service add.

John Tripolsky: 51:25

It's it's doing right by your client. Where how does somebody actually almost don't call it take the next steps. But, like, how do you guys work a little bit more direct if we can expand on that just for a couple moments with a tax pro like with the CPA? I know we talked about it a little bit. And, Chris, I know you have extensive experience working with ID, you know, directly in their firm.

John Tripolsky: 51:46

But, like, what does that relationship really look like when you guys are in a yeah. I wouldn't say you're quote, unquote the back office really of doing this, but, like, what does that relationship kinda what's the outline of it? How does it look and feel?

Heidi Henderson: 51:59

Yeah. Yeah. I mean, I like to look at it as a partnership. We have clients ask us all the time, where do we come into this? I I liken it to the medical space.

Heidi Henderson: 52:11

Like, we're the specialists. If you need a knee replacement, you don't want your family practice doctor to replace your knee. I promise. They go find your orthopedic specialist, and then you can go back to your family practice guide for your follow-up. And, you know, make sure everything's good with your overall health.

Heidi Henderson: 52:31

That is the same situation. We want to work in collaboration with our CBA partners and clients to be able to make sure they're getting taken care of at the highest level. We do have an amazing, fantastic kind of referral partnership program and affiliate program. And we've recently launched a platform that we're excited about where our partners can actually, make introductions. We can work on looking at a proposal, and then they always have the ability to log into that and see the status of projects.

Heidi Henderson: 53:06

So they can see in there, oh, yes. Here's, you know, John that I sent over. Oh, they're working on a cost segregation right now, and it's in the site visit planning phase. That's great. There is a revenue share component to that as well, so it can be a wonderful way for CPAs or or, accounting firms to be able to increase their revenue and really just expand their offering without really having to hire someone or learn all this extra expertise.

Heidi Henderson: 53:34

And we strive to be a trusted partner at a very highly professional, level so that we can answer questions and be here to kinda help, you know, work through those those, projects and those questions as they come up. So we don't want anybody to feel like they're left hanging, where they're unsure of what to do, what's the final report is issued, how to finish the tax return. So we oftentimes I personally have many calls where I'm dealing with a client, and then at the end, I'm having a private conversation with the CPA without the client, you know, so that the CPA is saying, look. Okay. What do I need to do on the filing?

Heidi Henderson: 54:13

You know, how does the 3115 flow in here? And we can really assist with walking through that portion as well. So our goal is really to just be a great a great partner with our, our tax preparer friends, and we have a lot of things that we've built out over the years to help support the industry.

John Tripolsky: 54:31

Amazing. Amazing. Amazing. Yeah. Thank you for describing that because I'm sure there's some, you know, uncomfortable or uncharted waters for some where they're like, well, I'm about to hand this client over.

John Tripolsky: 54:40

What does it look like? And I I know, Chris, you guys in the private practice world, you guys have done that multiple times. So

Chris Picciurro: 54:46

Yes. Well, thank you, Heidi, so much. I mean, I think takeaways, if you have someone if you have a client in real estate, and they own and and buy and hold property, please look at that tax return. Reach out to either us here at the at, MRR Institute or Heidi directly. All of our information will be in the show notes.

Chris Picciurro: 55:06

Remember, this is all the key takeaway. The asset could have been purchased in the previous year. It doesn't and you can still do a cost segregation study kinda like a subcontribution up until the extended due date of a tax return. It does not have to get done before December 31st. And I can't tell you how many times this has saved people's behind also.

Chris Picciurro: 55:26

Excellent. Well, thank you, Adi, for joining us.

John Tripolsky: 55:27

This is always always a pleasure having you.

Heidi Henderson: 55:30

Oh, you're so welcome. Thanks for having me. I always love I love love chatting with you guys, and I love your your, the way that you're helping the accounting space and the tax corporation world. It's what's so needed in the industry, so I always love doing projects.

John Tripolsky: 55:44

For everybody that's listening to this, go ahead and share this episode with anybody you think may benefit from this specifically. Again, it's a topic that I know there's a lot of interest out. And while you guys are sharing that, I need to go stock up on sticky notes. So until next time, we will see everybody back here on the mister r show.

Outro: 56:05

You've been listening to the Mister R Show presented by the MRR Institute. For more content like this, be sure to check us out on YouTube for weekly expert tips. And don't forget to subscribe to this podcast to stay updated on the latest strategies for scaling and modernizing your tax practice. Looking for more? Contact us at mrrinstitute.com for practice resources, coaching opportunities, and a peer to peer mastermind group.

Outro: 56:33

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Disclaimer : 56:37

The content of this podcast does not constitute an offer of securities. Offerings can only be made through an offering memorandum, and you should carefully examine the risk factors and other information contained

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The content provided is for educational purposes only. We encourage you to seek personalized investment advice from your financial professional. For all tax and legal advice, please consult your CPA or attorney. Investment advisory services are offered through Cabin Advisors, a registered investment adviser. Securities are offered through Cabin Securities, a registered broker dealer.