Purchase Price Allocation Purchase Price Allocation Federal Appraisal, LLC provides full reports and management support when allocating a purchase price among the various assets included in a multi-asset or portfolio acquisition or disposition. A purchase price allocation is based on the value of the various assets. As appraisal experts serving a large geographic area where a portfolio of assets is more likely to occur, and as appraisal experts on special and complex assets where various classes of assets are more likely to have significant value, Federal Appraisal, LLC is uniquely qualified to serve. Special considerations in our purchase price allocation include: financial, tangible, intangible assets individual economic entities individual properties property, plant and equipment goodwill and customer relationships in-process research and development current or existing technologies and products patents, trademarks and trade names developed software and databases assembled workforce (workforce in place) SEC and IRS requirements See Business Valuation/Asset Type for more.

Cost Segregation Cost Segregation Studies, or Accelerated Cost Recovery, assists real estate owners and corporate executives in reducing federal income tax liability and thereby realize a significant increase in cash flow. This is accomplished by reclassifying certain building and land improvement asset costs into shorter 5, 7, and 15-year recovery periods in order to maximize depreciation expenses. Federal Tax Depreciation Current tax law holds that any addition or improvements to non-residential Real Property already in service is depreciated using the straight-line method over a 39-year recovery period. Residential Real Property is depreciated using the straight-line method over a 27.5-year recovery period. If improvements to property can be classified as tangible personal property, MACRS (Modified Acceleration Cost Recovery Systems) depreciation is calculated using shorter recovery periods and applicable accelerated methods. Current MACRS and property classifications for federal income tax purposes are outlined in the 1986 Tax Reform Act (TRA 86) Cost Recovery Systems and the Omnibus Budget Reconciliation Act of 1993, along with the Internal Revenue Service Code. These guidelines identify items considered to be Section 1245 (5–7-year life) and Section 1250 (ADR midpoint life of 27.5 years or more) property. Cost Segregation Studies and Federal Tax Benefits Cost segregation is a complex process, and our senior cost engineering and real estate valuation specialists can work with you to bridge the gap between construction and accounting to ensure your tax benefits are maximized. Our studies are provided by experienced professionals who will: Work with you and your accountant to procure data related to acquisition or construction. Analyze owner project costs, contractor payment applications, and other cost documentation for reconciliation to property accounting records. Perform cost engineering analysis utilizing project construction plans, construction cost manuals such as RS Means and Marshall & Swift, and conduct a physical inspection of the property to document findings. Determine the appropriate tax life for building and land improvements by researching and identifying relevant case law and tax code. Issue a written report that contains project property data, related tax information, and excel spreadsheet asset value schedules that support our findings. The potential federal tax benefit or payback for identifying and reclassifying each dollar of 39-year Real Property is: 5-year Personal Property – about 22 cents for each dollar reclassified; 7-year Personal Property – about 18 cents for each dollar reclassified; 15-year Real Property – about 10 cents for each dollar reclassified. Our project experience suggests that when the tax savings from a cost segregation study are used to reduce the cost of construction, taxpayers may effectively reduce the overall cost of construction by 2% to 6%. In addition to reducing federal income tax liability, another benefit derived from a cost segregation study may include lower sales tax exposure. For example, some states grant tax exemptions for tangible personal property used in the manufacturing process or research and development. These types of assets are typically identified and valued as part of a study for state and local tax purposes. Prospective Clients Federal Appraisal, LLC provides cost segregation studies for traditional investment and corporate real estate such as office and retail shopping centers, hotels, apartment and restaurant properties as well as special purpose properties such as industrial facilities, assisted living centers, resorts, casinos, golf courses, and power generation facilities. You can benefit from the increased cash-flow derived from the tax benefits of accelerated asset depreciation, and a cost segregation study is highly recommended for real estate owners who: Constructed and placed in service new real estate assets; Purchased new real estate assets or made additions or improvements; Expect to hold these assets for more than three years; Have historic real estate asset costs that have not been segregated for depreciation purposes. The best time to apply a cost segregation study is when assets are acquired or placed in service. Studies can be used for new and existing properties, and can be applied to both older and newly acquired holdings. Studies also provide benefits for such purposes as purchase price allocation, sales tax savings, lower property taxes, improved fixed asset records, and asset retirement. Cost Segregation allows taxpayers to substantially increase their after-tax cash flow and defer federal and state income taxes by accelerating depreciation expenses. Non-segregated residential real estate is depreciated over 27.5 years and a non-segregated commercial real estate is depreciated over 39 years. A cost segregation study will identify and reclassify the elements of the real estate. Some real estate elements have depreciation schedules of 5, 7, and 15 years, which are dramatically shorter than 27.5 and 39 years. Cost Segregation is one of the most significant tax reducing opportunities available in the real estate industry. Federal Appraisal, LLC provides cost effective, USPAP-compliant cost segregation studies that are certified by MAI’s, ASA’s and that are conducted by professionals with engineering backgrounds. We recommend examining a company’s cost segregation program, whenever the company: acquires real estate builds a new asset installs leasehold improvements installs additions or expansions, or renovates an existing asset discovers historical costs have not yet been segregated The Cost Benefit Test for Cost Segregation 1. Can your organization benefit from sheltering income? 2. Did your organization buy or build any facilities at a cost of more than $2,000,000, since 1986? 3. Does your organization expect to hold the facilities for more than three years? If you answered “yes” to these questions, then your organization will benefit from a professionally prepared cost segregation study. Cost Segregation studies may provide other benefits, such as purchase price allocation, sales tax savings, lower property taxes, and improved fixed asset records and registers. Cost segregation can be used for new and existing properties, and can be applied to both older or newly acquired holdings. The best time to apply cost segregation is when assets are acquired or placed in service. Cost segregation is complex because of the numerous depreciation classifications and the engineering and real estate expertise required to determine the appropriate classification. In addition to providing Cost Segregation services for traditional investment and corporate real estate, Federal provides Cost Segregation services for special purpose properties, such as power generation facilities and manufacturing facilities. See Business Valuation/Asset Type page for more information.

Estates & Gifts Federal Appraisal, LLC provides appraisal services for gifting closely held stocks or interests in partnerships and real estate holdings and for IRS estate issues. Real Estate Appraisals for Estate & Gift Tax Purposes All appraisals are written for specific purposes. An appraisal written for one purpose may not be appropriate for use in another purpose. Appraisals ought to be written specifically for estate and gift tax purposes. Federal Appraisal specializes in appraisals for various IRS reporting purposes, such as Estate and Gift Tax purposes. Business Appraisals for Estate & Gift Tax Purposes Similar to the circumstances discussed above, business appraisals (appraisals of businesses and business intangibles) written for estate and gift tax purposes are distinct from appraisals for other purposes. Federal Appraisal specializes in such appraisals. See Business Valuation/Asset Type for more. Discount Studies Estate & Gift tax appraisal issues have become complex over the years. Essentially, property and business management require two distinct appraisals. The first is an appraisal of the underlying real property, business, or asset, with an undivided/fee simple interest. The second is an appraisal of the discount to be applied to the undivided/fee simple interest in order to find the value of a partial interest. These appraisals are commonly called “discount studies.” An essential part of the estate and gift tax analysis is the determination of the appropriate discount for partial interests.   The lack of control, the lack of influence on management, and the lack of marketability/illiquidity associated with a partial interest can often dramatically reduce the value of an asset, and hence the taxable basis.  When discounting for less than a controlling interest, several factors should be considered, including but not limited to: Lack of Control and Management size of interest and dispersion of voting interests limits to distributions restrictions on transfer of interest key person, general or limited partnership interest Lack of Marketability and Illiquidity restrictions on sale rights to partition blockage factors investor appetite for type of investment cost of delay and reduced cash flow indefinite or finite investment/partnership Form 8283Federal Appraisal, LLC has experience with and can certify (sign) Form 8283, Non-cash Charitable Contributions as well. Leveraged Reverse Freezes The process of undergoing a Leveraged Reverse Freeze can be highly complex. In a leveraged reverse freeze, a preferred partnership interest is exchanged for either a note, transfer of preferred partnership interest to a designated grantor retained annuity trust (GRAT), or other types of real estate planning means. The end goal of a leveraged reverse freeze is for the receiving family member or GRAT to receive a portion of the cash flow and appreciation after all interest payments/GRAT annuity payments have been accounted for. We at Federal Appraisal offer services to help those who interested, or may be interested, in partaking in a Leveraged Reverse Freeze.

Accounting, Tax, or Audit Federal Appraisal specializes in appraisal for accounting and tax issues. Whether your accounting/consulting firm is working on tax, audit, management consulting issues, or VFR/Investor Reporting, Federal Appraisal, LLC offers expert solutions. Our practice includes qualified real estate appraisers with designations by the Appraisal Institute (AI), the American Society of Appraisers (ASA), and the Royal Institution of Chartered Surveyors (RICS). Valuation for Financial Reporting Federal Appraisal, LLC is prepared to assist clients with Valuation for Financial Reporting. As the financial reporting industry continues to move toward global standards, it is relying less on historical cost-based accounting on the balance sheet and moving more toward a market based, fair value system. Statement of Financial Accounting Standards 157, Fair Value Measurements, defines fair value as: “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” As Valuation Specialists, with strong backgrounds and certifications in valuation and financial reporting we are uniquely qualified to assist your company or clients with the following Valuation for Financial Reporting needs using generally accepted appraisal standards. cost benefit studies feasibility studies highest and best use analysis zoning studies rent studies property utilization studies market analysis forecasting and trend projections property tax consulting verify managements assumptions and estimates identify and test valuation techniques validate inputs for valuation techniques Tax and Audit Issues and Solutions Federal Appraisal, LLC has solutions for the following tax issues impacting real property: Real and Personal Property Taxes Purchase Price Allocation Studies Cost Segregation Studies transfer taxes gains taxes income taxes Estate & Gift Appraisals and Consulting International Financial Reporting Standards (IFRS) Some of the audit issues facing real property that Federal provides solutions for include: Impairment Studies corporate structuring management audits and consulting benchmarking and best practices consulting Federal Appraisal, LLC provides numerous services to assist property owners in managing the various taxes and audit issues that impact real and personal property, including: Property Tax Assessment and Appeal Appraisal useful life studies fixed asset registers special value reportingssynthetic leasessale-lease backsstructured leases Impairment Studies audit support consulting FASB Standard, Leases, ASC 842 Starting in 2019, public companies will need to report the value of operating leases on balance sheets. The impact to balance sheets could be significant. While the calculations of value for many such leases do not require the assistance of appraisers with special knowledge, some certainly do. The reporting may require net present value calculations using market terms. Furthermore, while addressing ASC 842, accountants may wish to address leases with above or below market terms (intangible assets or liabilities). Federal Appraisal can provide these services. Other Valuation Services Federal Appraisal, LLC also provides a variety of valuation services that relate to potential appraisal needs, including: accountingFASB 141R – business combinationsFASB 142 – goodwill and other intangiblesFASB 144 – impairment or disposal of long lived assetsFASB 133 – derivative securitiesFASB 123R – options/share-based payments FASB Interpretation No. 45 – debt/guarantees taxIRC Sec 1060 – purchase price allocationIRC Sec 1245/1250 – cost segregationIRC Sec 409A – stock based, nonqualified deferred compensation plansIRC Sec 108 – debt cancellationIRC Sec 382 – net operating loss limitationsIRC Sec 482 – transfer pricingIRC Sec 367 – reorganizationsIRC Sec 304 – deemed dividendIRC Sec 338 – foreign tax credit planningIRC Sec 861 – allocation of interest expenseIRC Sec 165(g)(3) – worthless stock deductionsForm 8283 – Noncash Charitable Contributions (Gift & Estate Tax) gift and estate tax valuation of closely held restricted stock otherasset-based financinginsurance appraisal services ad valorem opinion servicesfairness opinion solvency opinion Special Valuation Issues in Tax and Audit Federal Appraisal, LLC has solutions for the following uncommon issues impacting real property: self-managed 401K 1031 like-kind exchanges bargain/liquidation purchases/sales barter agreements before & after tax cash flow & income forecasts before & after tax returns & yields studies below market rate loan from parent casualty/losses charitable contributions/gifts comfort letters damages estimates depreciation & cost segregation property due diligence services easements employee stock options exchange basis fairness opinions foreclosure/recapitalization gift tax appraisals high basis / low value reorganization impairment studies incorporation increased basis in property prior to disposition insurance claims Lease Auditing & Analysis landmark easement contributions litigation support & expert testimony merger & acquisition valuations and consulting portfolio & mass appraisals preservation/conservation private REIT’s real property tax reviews REIT issues sale/lease backs & LILO’s tax estimations & projections tax shelters valuation management & audits valuation/real estate study reviews Management Consulting Issues and Solutions for Accountants Federal Appraisal provides user-defined scopes of services and agreed upon procedures services relating to accountants. Securities and Exchange Commission (SEC) Federal Appraisal, LLC provides the real estate appraisals and valuation reporting support required by the SEC. See our SEC page for more information. Internal Revenue Service (IRS) Federal Appraisal, LLC provides the real estate appraisals and valuation reporting support required by the IRS. See our IRS page for more information. Our Clients have chosen Federal Appraisal because we: Understand the key tax and accounting issues both domestically and internationally Are an independent firm with no Sarbanes-Oxley issues Deliver products and services accepted by the SEC, IRS and both the Big Four and regional accounting firms Federal Appraisal, LLC is not a law firm or an accounting firm. As such it does not offer legal or audit opinions. Federal Appraisal can obtain and/or manage those services for its clients, and Federal Appraisal can offer referrals to law firms and/or accounting firms for such services.