How to Use Cost Segregation

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Tom Brodie – CSSI Cost Segregation

 

Podcast Overview:

00:00 Helping building owners save on taxes
05:52 Accelerated depreciation for buildings
08:08 Understanding Bonus Depreciation Rules
12:22 Offering free estimates for buildings
13:27 Engineering-based cost segregation process
18:28 Understanding the R&D Tax Credit
21:45 Understanding R&D tax credits
25:20 Reconfiguring and reusing drywall
28:37 Discovering cost segregation
31:16 Discovering cost segregation loopholes
34:27 Handling IRS audit inquiries
39:05 Remote and Office Work Changes
40:03 Understanding property depreciation rules
45:38 Evaluating building estimates and assets
47:34 Understanding condo tax allocations
51:18 Navigating 1031 exchange complexities

Podcast Transcription:

Tom Brodie [00:00:00]:
So that’s a dollar for dollar reduction in the taxes you owe. Cost segregation is a deduction. So that’s going to lower your amount of income, which means you pay less taxes. So if you got an R and D tax credit of $20,000 and you had a liability of $20,000, now you owe zero because that’s going to wipe out the liability. So tax credits are a little bit more valuable than a deduction as far as the impact.

James [00:00:27]:
You have found Authentic Business Adventures, the business program that brings you the str and triumph and successes of business owners across the land. Downloadable audio episodes can be found in the podcast link found drawincustomers.com we are locally underwritten by the bank of Sun Prairie Calls On Call Extraordinary Answering Service as well as the Bold Business Book. And today we’re welcoming, preparing to learn from Tom Brodie of Cost Segregation Services. So Tom, how is it going today?

Tom Brodie [00:00:56]:
It’s going very well. Thank you for having me on the program.

James [00:00:59]:
Yeah, I’m glad that you’re on here. I love the name of your business because it says exactly what you do. So for those that may not know, can you tell us what is cost segregation?

Tom Brodie [00:01:11]:
Yeah, it’s, I know that people stumble over that all the time. What we do is we help commercial building owners depreciate their building faster and say faster just because it’s faster than what they’re used to. Right. What the CPA or tax preparer will do will take the value of the building and divide it by 39 years or 27 and a half years if it’s a apartment complex. What we do is say there’s things in your building are not going to last that long. So we do the study to say, okay, you’ve got this much assets in a five year category, this many assets, you know, in a 15 year category, and break it down that way and then help them depreciate it faster, which means more depreciation expense is less income, which means less income taxes. And so you’re really saving a tremendous amount of money in income taxes.

James [00:01:59]:
So when you’re talking about assets, can you elaborate on what those are?

Tom Brodie [00:02:04]:
It’s a commercial building. I mean, so if you got, you know, you’re building, you’ve got the external walls and everything else, but then you’ve got so much on the inside, internal walls, you know, H vac controls on the inside, things that are not really key to keeping the structure upright. Those are the things that are going to have a slower, sorry, a faster life. And so you’re going to depreciate them faster and then record it’s the same dollars, you’re just recording it sooner. Right. And so you’ll be able to write that off when those things are worth more, the whole time value of money thing. So rather than waiting 39 years to get you, your asset depreciated, you can take about 30% of that on average and record it sooner.

James [00:02:42]:
All right, so you’re talking carpet shelving,

Tom Brodie [00:02:47]:
floor coverings, window coverings. Actually outside a building too. Parking lots are a huge expense that people don’t think about. That’s a 15 year asset. So if you’ve got a big parking lot, that’s going to be something we can write off right away. And then security systems, fencing, you know, irrigation systems, everything outside the building that’s not really part of the structure. Those are going to be usually in the 15 year asset category.

James [00:03:11]:
All right, now I understand you’re not an accountant, but I’m still going to ask the question because it eludes the question. Hey, instead of this cost segregation or the depreciation being spread out over 39 years or 27 years, you do a chunk of it, 30% ish, right away. What happens if you sell it? Sell the building?

Tom Brodie [00:03:31]:
Well, that’s the one thing that we tell people. If you’re getting ready to sell it right away, you don’t want to do this. Right. Because whenever you sell any building, you’re going to have to pay recapture. And so if you accelerate the depreciation and then try to sell it the next year, all that savings is going to be eaten up when you have to pay back the recapture. So we typically tell people three to five years is a, is a good timeframe after cost seg study, you know, to hold it. If you’re going to hold it that long, then that reinvested of the savings is going to be able to create a return for you that will offset the recapture. I’ve had some clients turn around and sell it right away.

Tom Brodie [00:04:07]:
I said, we talked about this, right? You said you weren’t going to sell it right away. They said I made so much money I didn’t care about it. Okay, as long as you did that, full knowledge that I told you not to sell it right away. But it’s one of those things where, you know, things happen and you have to make a move. But we typically think that you’ve held on to something within three to five years, you’re going to be fine.

James [00:04:30]:
Right on. Do the math is what it comes down To, Right, exactly.

Tom Brodie [00:04:34]:
I mean we, we always, we give free estimates because that’s the one thing that people don’t understand. How much. These are big numbers, right. A lot of times. And so when you actually see the number there and then you put it into your calculation to see if this makes financial sense, a lot of people are surprised by the number to go. I didn’t know this was available. Yeah, it is.

James [00:04:54]:
Can you. Let’s just talk the numbers and let’s keep it relatively easy. Just for Neanderthals like me that aren’t that good at math, let’s just say for fun, we got a million dollar building, right? I just bought this million dollar commercial building, office space, warehouse space. I don’t know if it matters. Can you just walk me through the numbers I can expect and then what that turns into, as far as money in my pocket goes?

Tom Brodie [00:05:17]:
Absolutely. Now every building’s gonna be a little bit different. Like so if an office building is gonna have more things that you can actually accelerate than if you had just a metal warehouse. Right. Metal warehouse is pretty much a box. But if an office building got a lot of things on the inside of that building that you can depreciate million dollars on average, I’m usually finding a deduction, a tax deduction equal to about 20 to 25% of the building’s value. Now I say building’s value because you have to subtract land, right? So if it costs you a million dollars, you take the land out. Maybe you’re like $800,000 or something like that.

Tom Brodie [00:05:52]:
So it’s 20% of that building. Only value that could be in a depreciation deduction, right? So that’s, and with, with 100% bonus depreciation coming back, all those things that are accelerate acceleratable are things that you could write off in year one after doing a study. So it, it’s significant. So you know, not every building is the same. So the more internal walls and maybe the high end decor elements you have, you have a nice lobby with a lot of high end granite or marble or whatever. Those things cost money. And typically you’re not going to ROI on those, right? So if you can write all that stuff off in the first year, it’s the same total dollars of depreciation. Whether you wait 39 years or you’re going to apply this accelerated depreciation, it’s just being able to record it sooner.

Tom Brodie [00:06:39]:
And that’s, it’s, it’s a huge benefit.

James [00:06:42]:
So converting that $2 just to say you have this $200,000 expense, would it

Tom Brodie [00:06:49]:
be or right off the deduction. Right. So deduction you’re going to take, that’s the, that’s the depreciation amount. So it depends on your tax rate. Right. So if you want to look at, talk at tax savings, take that $200,000 and multiply it by your tax rate. Is it 20%? Is it 35%? And then that’s the amount of taxes you won’t be paying.

James [00:07:07]:
Gotcha. So if you’re in that 20, I don’t know what the brackets are. 25, 24% bracket times 200,000. That’s a healthy nut.

Tom Brodie [00:07:17]:
Absolutely. I mean those are things that a lot of times people can’t use all of the, all of the deduction in one year. And the great thing about this is it can create or increase a net operating loss. So that means you pay zero taxes that year and you roll the balance the remaining over until the next tax year. And I’ve had some people pay no taxes for two years after doing this because that was a, a big enough of a deduction that they able to roll it over to the first year. I mean, the year after.

James [00:07:49]:
That sounds awesome. Tell me, bonus depreciation, that’s 100%. How does that work? Because you have the elements that you talked about, the roofing, the parking lot, the carpet shelving, all that kind of stuff. I mean those are different years, but now they can be all wrapped up in one.

Tom Brodie [00:08:05]:
Yeah.

James [00:08:05]:
What are some of the rules that we have to watch out for there?

Tom Brodie [00:08:08]:
Right, right. 100% or the bonus depreciation applies to everything that’s non structural. So any asset that has an asset life less than 20 years, 5 year assets, 7 year assets, 15 year assets, those are the things that can be written off 100%. It’s not 100% of the building’s value because the structure is still going to be written off over 39 years or 27 and a half for multifamily. It’s the non structural pieces that’s eligible for 100% bonus. And the big beautiful bill brought back 100% bonus and made it permanent. That was first introduced back in 2017. And the 100% bonus window was from end of 2017 until the end of 2022.

Tom Brodie [00:08:54]:
And then that in that tax law, it was dropping 20% a year until it essentially went away. And before it went away last year, right after the inauguration, that’s when the 100% bonus came back and made it permanent. So there’s no phase out period. Now it’s going to be permanent until the tax laws change. So it’s going to stay 100%.

James [00:09:16]:
Right on. And is there, I guess we should talk about the actual financial value because I ran through this thing as well and I prefer money in my pocket now rather than money in my pocket 40 years from now.

Tom Brodie [00:09:32]:
Exactly.

James [00:09:33]:
That goes. So since the, the depreciation, the dollar amount’s the same. A dollar today is worth way more than a dollar in 40 years. So can you click on that a little bit more?

Tom Brodie [00:09:43]:
Yeah, that’s one of the things that people don’t really realize. They say, well, I’m getting the same amount of dollars. That’s great. But then I asked the question, if you want a $2 million lottery today, do you want to wait 39 years to get your money or you want your money now? And everybody says, give me the money now. And I said, it’s the same decision, but yet the beauty thing about cost segregation is you’re not taking a discount. Right. So it’s not a discounted cash flow. By taking the cash value of a lottery in this case, you’re just able to write it off sooner.

Tom Brodie [00:10:14]:
And that’s huge. I mean, that could be the difference between being cash flow positive and being cash flow negative. Now the one thing about that is that you’re not getting a check from the irs. You’re just paying a lot less in taxes. And then you can continue to pay less in taxes until you, you use up that depreciation write off.

James [00:10:31]:
Tell me a little bit about the individual items that are part of that. Let’s just say flooring as an example or carpeting. It really doesn’t matter the type of carpeting, Right. Cheap carpet or super expensive carpet is still carpet, right?

Tom Brodie [00:10:43]:
It’s still carpet, Right. So you know, the value, the value of those things are going to be giving you the most return. So I mean, one of the things I, I had actually a client who was a physician and he had just built his own building because most doctors don’t like to pay rent. Nobody likes to pay rent to someone else. If you can pay rent, you can pay rent to yourself. And so he hadn’t thought about that. He bought this building and put in very high end decor elements. He had a water wall in his lobby.

Tom Brodie [00:11:13]:
I mean an actual wall, really nice sounding if there’s water running. But he’s not getting an ROI on that. Right. So this was able to do that because everything connected to that water wall is non structural. It’s More decor elements. So you know, the pump, the circulation system, the water treatment, all that stuff could be written off in a five year asset. So it just depends. And if you have internal walls, internal windows in the walls between like different rooms and things like that, those are all things that are not structural.

Tom Brodie [00:11:43]:
Anything that’s a non load bearing wall, those are things that you can, can write off sooner. So if you have especially like in medical facilities, you’ve got dedicated electrical, you know, specialized, maybe in like an X ray room, you may have specialized shielding, you know, X ray shielding for the room. All of that stuff is kind of over and above what a normal building would have. And so that’s, those are things that you can depreciate quicker.

James [00:12:08]:
So when people are purchasing these buildings, commercial properties, are there certain types of buildings that they want to aim for to take advantage of this more or do they all, all buildings more or less can have this advantage?

Tom Brodie [00:12:22]:
All buildings can, will have this advantage. I mean they’re eligible for that now. You know, like I said, if you’ve got more specialty kind of items in it, then the total percentage of, of your return on a cost will go up. But any building, in fact, you know, we’ll look at buildings with the building value as low as $200,000. And you know, buildings, that’s a pretty small building, but it’s those kind of buildings. So people that own smaller buildings like that, they can actually get, get a reasonable return on this as well. So that’s why we offer free estimates, just to be able to show what, what’s available. And our estimates are, will give you a range, a high to low range based on other buildings that we’ve done and already studied that were very similar to yours.

Tom Brodie [00:13:05]:
So that way you will know we feel real comfortable. It’s going to be between this number and this number. It may even be greater once we get in there and see the inside of your building.

James [00:13:14]:
All right, perfect segue. Let’s talk about how you actually get into the building. Is this remote? Is it in person, is it just trusting someone like me is like, hey, I got some carpet or how do you figure that out?

Tom Brodie [00:13:27]:
What we do is called engineering based cost segregation, which is the highest level that the IRS likes to see. We want to see building drawings. You know, if you’ve got something that was built, give us the construction budget and the building drawings. If we don’t have building drawings, you know, we’ll take whatever we can get, but we want to see the actual costs that goes into the building and Then we’ve got engineers, cost engineers on our side too that if, and a lot of people don’t have the original design drawings and the original cost if they bought a building already, you know, was already existing. So we’ll take whatever we can get and then our cost engineers are pretty good at costing these things. And we’ll actually send a photographer like I’m in the, in the, just north of the Houston area. So this is a building close to me. I’ll go and take pictures if it’s somewhere else across the country and I can work anywhere in the US We’ve got a contract with the third party photographer company that they specialize in taking, you know, pictures of, of assets.

Tom Brodie [00:14:27]:
And so that’s one thing to also think is I have people say well I’ve got my marketing pictures and no, that won’t cut it because we want to see, you know, marketing is a little bit about how it looks and you want to take a wide angle lot, wide angle pictures to make it look bigger. We want to see what the asset actually looks like because we, we need to try to value the asset based on the pictures that we have. So someone will actually be on your property at some point. But then we take everything else remote and then send it to our engineering and accounting team and they do all

James [00:14:58]:
their work right on this business. Was this a thing prior to 2017?

Tom Brodie [00:15:05]:
It was actually. The IRS lost a court case in the late 90s, I think 99, I think where and it was a hospital corporation said there’s so much of our building’s not going to last 39 years. Why are we depreciating it longer than the assets going to be there. We’re going to replace it. Before that they lost the case and so then they had to come up with these asset classes like a 5 year asset, 7 year asset, 15 year asset in the structure, like I said is 39. And so it’s been around since then. In fact, the founder of cssi, the company I work with, was part of that original court case on, on the winning side where and he thought of this is something that everybody can benefit from. So initially it was all the big ten accounting firms that had people on staff and they would send an army to.

Tom Brodie [00:15:58]:
Army of people to your building was very expensive. And the owner of cssi, the founder said there’s other ways to do this right? Let’s, let’s do this smarter, not harder. There’s no reason why we have to have people occupying your space and taking time, you know, having to house all these, these team of people, we can do that remotely. And so, you know, kind of gradually they built in this process. Like we have to have pictures, but then everything else, we don’t need to be there. Right. Because once we have pictures and drawings, we can do our work remotely. And so that’s how the industry kind of developed.

James [00:16:32]:
All right, tell me. I don’t know if you know the answer to this, but I want to ask, just out of Curiosity.

Tom Brodie [00:16:37]:
Sure.

James [00:16:38]:
The 39 year for commercial property, 27 and a half year for residential, where do those numbers come from?

Tom Brodie [00:16:44]:
That I don’t know. I know that the, the difference between 39 and 27 is kind of obvious if you think about it. If you’re in an apartment complex, you’re living in that a longer period of time during the day, then you’re at an office building. Right. And so they’re saying more wear and tear and more occupation of the building. It won’t last more than 27 and a half. Where that number comes from, I don’t know. But that’s the difference between an office building and an apartment complex.

Tom Brodie [00:17:16]:
The other thing to think about that is for a short term rental, like a vacation home or an Airbnb, that’s classified as a short term rental. And so that’s a 39 year asset. Think of that like a hotel. It’s the same category as a hotel.

James [00:17:30]:
Oh, interesting. Okay.

Tom Brodie [00:17:32]:
And we see that a lot. There’s problems with that because some tax professionals see that as a rent house and say, oh, that’s like an apartment. No, shorter window of occupation each time means that the asset’s going to last longer. Right. It’s not as much wear and tear as if somebody’s living in an apartment for a number of years or something. So that’s why there’s the differential. And that gets lost a lot of times.

James [00:17:55]:
All right, this just seems like an obscure number. 39. Why not 37 or 42 or. Who picked that number?

Tom Brodie [00:18:02]:
I don’t know. That’s a great question. I’ll have to look that up and see if, see if our team even knows the answer to that.

James [00:18:07]:
Sure. I’m sure there’s some maybe in that lawsuit or something like that. It just seems. Even the 27 and a half.

Tom Brodie [00:18:12]:
Yeah.

James [00:18:12]:
Not 27 and three quarter, not 26. Just some numbers. Why is an inch an inch? Right. Who knows? Tell me a little bit more about the. You have more going on. I saw the research and development tax credit.

Tom Brodie [00:18:28]:
Yeah, that’s another one. That’s Actually pretty unique in that a lot of people, especially manufacturers. So if a company is manufacturing anything, they’re having to solve for some part of their manufacturing process. Maybe they’re trying to make their widget more effective or use less materials. So the IRS and the government is trying to want to. Wants to keep all those innovations in house in the country. And so that’s why they’re offering this, this credit and they call it the research and development tax credit because in their mind that’s what that covers. But most people like the lay people out there that maybe own the business, like I don’t do R D because they’re thinking in their minds, guys in lab coats, in clean rooms.

Tom Brodie [00:19:14]:
Right? Well, yeah, that applies to that. But there’s a lot of it, that R D activity that happens on the manufacturing floor. Right. So if you’re trying to integrate a new piece of machinery into your process, there’s some trial and error that goes through. So for the research and development tax credit, you have to have. You have to show that you’re actually using the sciences and going through a trial and error. And so all of that staff time and materials that are spent in that trial and error because you’re trying to solve for an unknown. Those are expenses that you can claim as R and D expense and then based on that calculation actually come up with the credit.

Tom Brodie [00:19:52]:
So it can be significant, especially if you’re doing these things and you don’t realize that they’re R and D. Because a lot of companies that I approach about this, that I don’t do R and D. Yeah, you do. IRS says you do, even though you don’t think you do. And we’re going to help you document it and then file for it.

James [00:20:10]:
Can you elaborate on that a little bit? Because I’m picturing a company that manufacture, I don’t know, let’s just say they manufacture keyboards and they’re doing some research to try to find a keyboard that’s smaller or more tactile or something like that. Yeah, they got an employee that they’re paying, so that is already subtracted. They have the, I suppose the manufacturing equipment. That’s already an expense. They have the. Well, I guess what is. What else would they have?

Tom Brodie [00:20:35]:
It’s anything that you’ve actually used the sciences to go through and try to solve your issue. Right. So if you’re trying to. Let’s take the keyboard example, if there’s a better ways or more ergonomic layouts for keyboards, well, you’re. You’re gonna have to you’re not just gonna wing it, right. So you’re gonna apply some science and some scientific study to figure out what’s the best layout and maybe what’s the best, you know, return rate for a key, the little bounce on the keys. So those are things you have to do, calculate. You’re going to use some probably third party information as well.

Tom Brodie [00:21:09]:
But you may have to pay for some of that. Right. Some of those studies. So even though you’re paying the expenses and that gets expensed, it’s almost, almost, I hate to use the word double dip, but it’s a different way to take advantage of that. So you’re paying the expenses, but then you’re going to be able to categorize this as, this is some R and D expenditures. And, and it’s one of the things that you have to be solving for, for a problem and you have to be using the sciences and it’s a pretty broad sciences. Yeah. So you’ve got to, you’ve got to have a process, right? And so you’ve got to have a process that you can help document that says we can help with that.

Tom Brodie [00:21:45]:
This is the steps I went through and this is what I’m trying to solve for. And this is how many iterations it took. And so all of the staff time involved in those iterations and also the supervision of those staff as well gets counted up. So the R and D tax credit is very heavily wage based. So it’s wage based and any consumables, materials that you have to consume, going through your trial and error process, that gets included. So it could be, you know, you talk about people make keyboards, people make tortilla chips, distillers, brewers, they’re using sciences to come up with their next flavor of beverage. Right? And so all of those things get involved and it’s called a qualifying, a qre, a qualified research expenditure. So those are the things that we help you calculate.

Tom Brodie [00:22:34]:
And then you can know how to, what the credit’s going to be to file for the tax credit.

James [00:22:39]:
Gotcha. And tell me how you help people with that. Because is it helping them with documentation or something deeper than that?

Tom Brodie [00:22:47]:
A lot of times they have the documentation and they don’t know it. And so we’re going to help them say, okay, what kind of records do you have? And so if it’s timesheets or whatever, then we say, okay, how much of this person’s time is spent in this activity? And so we’re just going to help them do the calculations because we’ve done this a lot. And so this kind of template that we can apply once we get some records from them. But that’s the biggest issue is they say, I don’t, I don’t keep track of that. You do, you just don’t know. You do. Right. So we’re going to look at their data a little bit differently and say, this is what we need to come up with and we’ll ask for the certain records.

Tom Brodie [00:23:23]:
And a lot of times there’s consumables that they’re spending and we just have to identify what those consumables are. And then once we know they know how much they cost. Right. So it’s one of those things just kind of guiding them to say, this is what we need and this is why we need it. And then have them in that mentality where they say, oh, what about this? You know, they may be asking other things. I’ve run into clients about this, where they think of. And it’s kind of that white lab coat mentality. They say, well, I’ve got a bunch of PhDs that are doing all this calculation and stuff.

Tom Brodie [00:23:55]:
Yeah, that’s some of the, that’s some of the work. But you have people on the manufacturing floor who actually putting those formulas into place, into action. Right. So it’s not just the PhDs work, it’s the guys who are actually pushing buttons on the machine. So their staff time is involved as well.

James [00:24:13]:
Gotcha. Tell me, how does that look on the taxes themselves?

Tom Brodie [00:24:19]:
Well, it’s gonna actually give me. The R and D tax credit is a credit. Right. So that’s a dollar for dollar reduction in the taxes you owe. Cost segregation is a deduction. So that’s gonna lower your amount of income, which means you pay less taxes. So if you got an RD tax credit of $20,000 and you had a liability of $20,000, now you owe zero because that’s going to wipe out the liability. So tax credits are a little bit more valuable than a deduction as far as the impact.

Tom Brodie [00:24:48]:
But they’re still. Yeah, they’re still valuable. Both of them are valuable.

James [00:24:52]:
Right, Interesting. And what else did you have here? Green Zip drywall tape.

Tom Brodie [00:24:57]:
That’s amazing stuff. Green Zip. This is something we partnered with a company that actually makes it and they. It’s many, actually. Not too far from my house. I didn’t know that. It’s in Montgomery, Texas. That is a mesh tape that you put in, you know, between drywall pieces and you mud over it, paint over it, just like anything else.

Tom Brodie [00:25:20]:
The Beauty is if you have to reconfigure that space, pull off the baseboard to grab the tail of that tape, pull it up, and it pulls off the mud. And now you’ve got the screws exposed, you can unscrew that drywall and then drop it down, reuse the whole drywall in just in place, just take it off. So there’s no demolition, there’s no drywall dust, any of that. The fact that you can reuse it, and we got, the company got certification from the irs that now is a movable and reusable partition which has a five year asset life. All right, so that ties back into the cost seg. Right. And now everything attached or in or behind those movable partitions are now five year assets as well. So electrical, plumbing, H vac controls, all that stuff is now five year asset.

Tom Brodie [00:26:14]:
So if you’re going to build a building with and using the drywall tape, 30% of your construction costs are now deductible in the first year because it’s a five year asset. Wow. So those are things for, for buildings that. And you know, the tape itself has got a license fee for it and that’s kind of expensive. But if you’re building like a 10 million dollar building or greater, this is huge because it’s going to be such a great benefit. Plus there’s some LEED credits you can get. This is like the green, green construction credits that you can get because you’re reducing drywall debris. You know, you’re not throwing stuff into the landfill.

Tom Brodie [00:26:55]:
You’re going to reuse that. So there’s about seven, I think, different LED credits that you can get if you’re using drywall tape to build your building.

James [00:27:04]:
Wow.

Tom Brodie [00:27:05]:
And the green zip drywall tape, that

James [00:27:08]:
is, that’s impressive, Tom.

Tom Brodie [00:27:10]:
It’s all this stuff, I mean, and this is the green, the, the green zip tape’s been around for about 20 years. It’s just not well known. I mean, there’s a building in downtown Houston, it was a Chevron building. It’s like a 50 story building. I forget how big that is. That was built with drivable tape, you know, back probably 15 years ago. And so I don’t have the numbers on that, but it was a huge benefit for them.

James [00:27:34]:
All right, interesting. Tom, let’s shift gears here a little bit and talk about business specifically with you.

Tom Brodie [00:27:41]:
Yeah.

James [00:27:41]:
How did you end up in the cost segregation world?

Tom Brodie [00:27:44]:
It’s interesting. I actually it was kind of a one of these things that you get invited or have one of your buddies. Have you heard about this? Because I, right out of college work, went to work for Shell Oil. And so I was working for them 27 years, took early retirement and kind of wanted to follow a passion of mine, scuba diving. And so I started working for a local scuba retailer, took an early retirement from Shell because back then they were offering that, right? So went to work for them. And then the problem with scuba diving, it’s, it’s an awesome, awesome sport. But as a business, it’s very dependent on your customers having disposable income and disposable time. Once they’re nervous about their jobs, they don’t go on diving vacations, they don’t spend money on, on, you know, nice vacations.

Tom Brodie [00:28:37]:
They kind of, kind of hunkered down. And so that was one of the things, you know, living in the Houston area back in, in 2008, oil prices were going down, people were kind of nervous about their jobs. And so for people in the kind of, in the disposable income businesses, it hurt them, right? Because that’s one of the things people didn’t, didn’t do. So I was trying to look for something else and a buddy of mine, I found out about this cost segregation and he said, well, have you ever heard about this? I went, no. So I checked into it and it seemed to be such a no brainer that, you know, my initial reaction was everybody’s got to be doing this already. I’m not going to be able to make any money at it because it’s handled, everybody’s already doing it. The reality is one of the things I found out is that not many people know about this and so they’re just, you know, they’re just not using it, they’re not doing it and their CPAs unfortunately don’t tell them about it. So it just, it goes on unused.

Tom Brodie [00:29:35]:
And so that’s where CSSI has done a lot of work trying to get the word out and get into going through social media and just throwing out things. In fact, we do a lot of seminars and things educating people to say if you don’t know if this applies to you, probably does and let’s tell you how. And so that’s one of the things I kind of found out about this. And I was actually working with another company that did cost segment. Somebody at CSSI reached out to me, they saw in my videos and said, who are you working with? And I told him, I said, you need to come work for us. And so you know that the rest is history. I’ve been with them going on eight years now. So it’s just one of those things.

Tom Brodie [00:30:11]:
It’s a great. It’s a very niche, you know, and not many people. Not many people heard about it. And some of the issues that if you’ve been in kind of the commercial building industry with own your own building for your business or you rent them out, they think they know, and so they don’t pursue it. Unfortunately, the people who are just getting into commercial real estate, they’re looking for every advantage. And so they’re the ones that are usually more open to this. And I. I get a lot more people who are just starting their portfolio, have heard about it and reach out to say, tell me about this.

Tom Brodie [00:30:46]:
How can I use this? And then we. We go from there. The people owned real estate for decades. Not so much. Unless they found out a bit along the way, they’re. They’re not as open to it.

James [00:30:58]:
You know, it’s interesting. I stumbled on it when I was doing some research online, trying to figure out how to lower my tax bill. Yeah, my accountant back then didn’t bring up any way to reduce taxes. He just said, this is how much you owe. Right. I give numbers. He churns them out. This is what you owe.

James [00:31:16]:
And eventually you come to the point where you’re like, you know, what are all these text codes I hear about or these loopholes that I hear about? How come I don’t have any loopholes? I need some more loopholes kind of thing. And so I go online and I look, and cost segregation was right up there. And so I go to my accountant and I’m like, hey, man, cost segregation, tell me a story. Is this worthwhile? And he’s like, ah, you could do that, but it’s expensive. And so I was like, how expensive? Right. Like, if I turn a dollar into $10, even though a dollar may be expensive, it’s still a pretty good trade. So it was interesting how I learned then that there’s a difference between accountants and tax strategists.

Tom Brodie [00:32:01]:
Yes.

James [00:32:01]:
Even though some of them just slap the accountant or CPA title on and call it good, and you don’t know which one they are until you actually talk with them.

Tom Brodie [00:32:08]:
Yeah, there’s a. To your point there, there’s a lot of misinformation out there about cost segregation. Number one, it’s expensive. Early on, you know, when the big ten accounting firms used to do it. Yeah. It was expensive because you’re paying for this army of people to sit on your. On your property for a while. But now that we do a lot of it, you know, remotely, it’s, it’s not expensive at all.

Tom Brodie [00:32:31]:
I mean, for example, if you had a million dollar building that we’re doing a cost seg study on, it may be, you know, six, $7,000 maybe. But if you’re freeing up 150 to $200,000. Yeah, the ROI, the ROI on that is huge. But I mean I think the early caustic studies back in the day were, you know, 40 and $50,000. And so now that’s what people remember is that it was really expensive, but it’s not, it’s not expensive anymore. It’s very doable. And, and the return get is, it’s just unbelievable. And you know, if I’m not getting a 20 to 20 to 1 or 20 plus to 1 ROI on a project, I’m kind of going, oh, this is not great.

Tom Brodie [00:33:16]:
But for the individual getting that money back, a 15 to 1 RI is, is awesome. Right. So it’s one of those things that just kind of your perspective has to change based on your, based on your investment.

James [00:33:28]:
Right. How has the IRS looked at this? I mean they lost a court case, so the rules come out in your favor there.

Tom Brodie [00:33:35]:
It’s in the code. I mean it’s in the IRS code. So you know, they document this very well as far as what they’re going to prove. And there’s actually six different levels of cost segregation studies that they’ll allow.

James [00:33:50]:
Wow.

Tom Brodie [00:33:51]:
Engineering, Engineering based like I described with the, we want to see plans, we want to see documents and all that. That’s the number one level. Then it kind of goes down from there. And the bottom one, which is the low documentation kind of low believability is kind of the DIY cost eggs. You know, you’ll see some of these are out there that you know, here’s the cost seg program that you can run on your own. Those I would not suggest just because that’s going to open you up to scrutiny. Right. So you know, we have in the CSI’s history have never had one of our studies overturned by the irs, which is awesome.

Tom Brodie [00:34:27]:
Now we’ve been pulled into audits where the company was being audited for another reason. And then they found our study that the company had used and so they had questions about that. We answered the questions and we’re good and there was no issue because we know what the IRS wants. Our VP of operations talks to them almost weekly, somebody on some format. So we’re, we’re very attuned to what they’re looking for and that’s what we give them. I mean, when you do a study with us, you’re going to get a 30 plus page document that goes through everything we used as far as the tax laws, how we applied the tax laws, what our assumptions were. All of that is in that study. And so you can rest assured that the irs, even if they saw it and wanted to see it, they’re going to look at, okay, it’s a cssi, we know what to do, doing.

Tom Brodie [00:35:14]:
And so it’s going to be looked at very favorable because we know what’s in the code and we’re going to stick to it. We’re not pushing the boundaries of the code. We’re going to stick to it. And, and, and we’re going to decide if it starts getting outside what we’re comfortable with. Like somebody said, well, we need to, we need to make this number a little bit bigger. We can’t, we can’t justify that based on your documents you gave us. So we’re not going to stretch it.

James [00:35:41]:
Sure. Carpet your walls.

Tom Brodie [00:35:44]:
Yeah, that carpet’s not worth a hundred dollars a square foot. I’m sorry, this is.

James [00:35:47]:
No, tell me you had segue here that I want to talk about with people trying this themselves. Because I remember when I was first learning about it, I’m like, I can measure the carpet. But then you look at, well, this much is. Or this stuff is 10 year, this is 5 year, this is 15 year. And it doesn’t take long for me to be like, you know what? I’m so out of my element, I need to hire a pro.

Tom Brodie [00:36:10]:
Yeah.

James [00:36:10]:
How many people are actually trying to do this on their own?

Tom Brodie [00:36:13]:
You’ll be surprised. A lot of people are. I wouldn’t say a lot of them are, but they kind of approach it like you did, like you kind of talked about and think, how hard can this be? Once they get into it, they go, okay. And I’m not sure that I’m well versed enough to be able to defend it. Right. That’s where it comes into play. In fact, I’ve had CPAs talk to me and say, well, you do the study on the building and we’ll do this part of the building. I was like, so you’re telling me you’re wanting to take this on your own and defend it? If anybody has questions about it versus letting us do it, and then the defense comes to us, why would you.

Tom Brodie [00:36:52]:
And then he said, okay, okay, you do the whole thing. So he was wanting to split up part of the building, where he does a study on part of the building and we do the study on the other part. Said now that you’re just going to open yourself up. And it’s things like you just experienced where I think that a lot of accountants and CPAs run into that, too. And so rather than them trying to do it, they just don’t, unfortunately, they don’t talk about it. So rather than say, let’s go find you a person, let’s go find you, you know, somebody that does this for a living, they just don’t talk about it, which is unfortunate.

James [00:37:26]:
That’s fair. You know, it’s funny, there was a time years ago where I’m like, how hard a tax is? I can do taxes. It’s just a form. You fill out the form. And I remember I had the kitchen table filled with all the documents and stuff like that. And I sat down and I start. And it’s like, add up line 7 to 8, and if 8 is higher than 9 or whatever, and I don’t even know if I stared at maybe five minutes, and I’m like, you know what? No, I’m just going to hire someone to.

Tom Brodie [00:37:51]:
Yeah, it gets back to the brain is on fire versus a time value of money is the value of your time. Right. So you’re going to do this and do maybe not a great job. So you spent that time, spent that money, and now you’re wondering if it’s right. So that’s another thing that we kind of tell people is that we, you know, you’re buying peace of mind with us because we’re going to defend it. No additional cost to you. If there’s ever any question, come to us if I can’t answer the question, or we’ve got a whole team back in headquarters that can. So that’s not going to be an issue.

James [00:38:24]:
Tell me a bill, a bit about the business itself across segregation services. How many employees are you guys work from home? Are you. Are you in an office?

Tom Brodie [00:38:33]:
Most of the people that they’re out there, the reps like myself, work from their house. Right. Our team, CSSI is actually located in Baton Rouge, Louisiana, and so that’s where all the engineers and folks are. But we have our people like me going out talking to building owners and trying to secure a study. And then we kind of act as liaison points. So we’ve got people that are like project managers back in Baton Rouge. And sometimes they work from home, sometimes they work from the office. Kind of depends.

Tom Brodie [00:39:05]:
I Mean, Covid changed the world, right? As far as what things could be done. But they used to all be housed in office and now I think they’re, they’re doing some remote and some office work. But the great thing about that is that all of our people now are spread out over the country. So you can probably find a local CSSI rep wherever you are, or someone that’s relatively close. So we’re 1099, most of us are 1099 contractors with the company. So we are gatherers of the information and we send it in. And so we’re kind of like the first line liaison too. So if a client has a question about something come to come to a rep, the rep that started studying with you, if they can’t get the answer, they’ll know somebody back at headquarters that can.

Tom Brodie [00:39:49]:
So I would say in the number of reps there’s in a couple hundred out in the, out across the country.

James [00:39:55]:
Gotcha. Tell me a story about the, the rules or the laws. I mean with irs, is it, are they laws or rules? I don’t know what they call them.

Tom Brodie [00:40:03]:
Oh yeah, absolutely. I mean one of the things, and that’s what people get nervous about just kind of you talked about am I doing this right? Am I going to make, am I going to overstep my bounds or things. You know, the IRS has regulations and as long as you fall within those regulations, you know, you’re good. I mean, one of the things I found recently a lot is, you know, when you have a building, you, you don’t, you can’t depreciate land. So when you buy a, purchase a building, you have to assign so much to the called the improvements, if you will. And then the land, right. So you have two different categories. The problem is if you allocate too much of that value to land, since land’s not depreciable, then that’s locked up and you’re never going to be able to write that off as a depreciation expense.

Tom Brodie [00:40:46]:
And one of the things we find is that that land calculation or the land allocation is somebody’s kind of made up number, right? So they say I’ll make it 50%. It’s like, is the land really worth 50% of a $1.6 million purchase? Really in California or New York State, New York, Long island maybe, but in Wichita, Kansas, I don’t know. That’s right. And so that’s one of the things I look at. Especially if a building’s owned for a couple years. What’s the land Allocation this year I found an error of $840,000 that was allocated to land and shouldn’t have been right. So we look at the county appraisal and the county assessor had it much, much lower and the difference was $846,000. And so I reached out, this was in Texas.

Tom Brodie [00:41:41]:
I reached out to a person I knew that was a commercial value, I mean a commercial property value specialist and he helps people fight their property taxes. And so I talked about the property. So what do you think this values were? And he says, I would look at the county’s value because in this case the county’s pretty close to being right. You know, it’s not worth fighting on that. So let’s change that land allocation, put the difference back into the building and now we’re doing a cost study anyway. So that gives us more money to actually segregate and divide up. And so that was, that was a beautiful finding. But the, the taxpayer, the building owner didn’t know of the error and the CPA didn’t know of the error.

Tom Brodie [00:42:25]:
They just, somebody made that distinction and put it on the books and never looked back. And if it hadn’t been for me, looking at the cost and going, this looks strange. You know, I always say I’m not going to tell you what your land’s worth. You need to find someone that you trust and believe in that. And look at, these are some of the sources we can look at and go to. But we’re not going to tell you what the lands were. But I’ll tell you when that’s maybe a problem. And maybe we need to look at how we can adjust that.

Tom Brodie [00:42:55]:
And the great thing, the IRS will let you make allocations and differences like that in what’s called a change of accounting method. That’s how we do a cost seg on a property that’s owned several years. You’re just going from straight line depreciation to accelerate it in that form. And you’re talking about filling out forms, it’s a 25 page form. To be able to do that and say, okay, we’re gonna, I’m going from straight line depreciation to accelerated. And this is how I got there. And this is the, the adjustment we’re gonna make in the current tax year. So that’s a beautiful thing because you don’t have to amend a previous year’s return.

Tom Brodie [00:43:30]:
You’re just gonna make that correction in the current year. Which brings you up to date. You’re current with your depreciation, you haven’t missed anything, and then going forward you’re fine. But that’s one of those things where we’re gonna go back and the IRS lets you do that because they don’t want to mess with an amended return either. Right. And so that’s kind of a red flag that a lot of people realize, I don’t want to amend the return. And so once they hear this change of accounting form, they go, okay, great. And once the CPAs say, oh, you’re going to do that for us, I don’t have to create that form, they go, yes, let’s do it.

James [00:44:02]:
Tell me, you raise an interesting point. If someone has already owned the property for a while, is there a point in time where it doesn’t make sense anymore? If they’ve owned it, let’s say 35 years or something like that, or is it closer to 10? What is the number where you’re like, eh, may not make as much sense.

Tom Brodie [00:44:18]:
Yeah, we start getting like 10 and 15 years. You know, the issue is you’ve been depreciating it all those years and there’s probably not enough asset value left for us to accelerate, quite frankly. But if it’s been any, anything less than 10 years, it’s worth taking a look at. Right. So it may not be $200,000, but if you can knock off $85,000, why wouldn’t you? Right. So it’s all an order of magnitude, but, you know, if you’ve owned it for more than 20 years, you’re into that 39 year category asset. We can’t depreciate it, we can’t accelerate it anyway. So it may not make sense.

Tom Brodie [00:44:54]:
And that’s why we do free estimates anyway, because the last thing we want to do is charge you $3,000 maybe for a small study, but you’re going to save 4,000.

James [00:45:05]:
Yeah, right. Yeah.

Tom Brodie [00:45:06]:
Is that really worth it? And it’s like one of those things, like. Yeah, sometimes it’s just, I mean, I will do the estimate, give it to the customer and say, you decide. If they ask my opinion, I’ll give it. But it’s their decision ultimately fair.

James [00:45:19]:
When it comes to someone that’s considering one of, let’s say, two or three buildings, does this come into play where they want to compare? Is there something that they should look for where they know this will cost Segal better than this other building? If they’re looking, trying to compare, like, of these three buildings, which one should I buy? They’re almost even in every other aspect.

Tom Brodie [00:45:38]:
Yeah, I mean, that’s one of the things that we do. We do that a lot. It’s kind of a preliminary estimate, you know, of three buildings. I mean, it may come back down to what they’ve got outside the building. The parking lots, landscaping, security, lighting, you know, some, maybe a little bit more. So that may tend to say, okay, this may be a better result because you have these additional assets that we can accelerate. If it’s just a straight up metal building, in that case it was like a warehouse, office, warehouse type. What percentage of office space is it? Is it 20%, 30%? You know, if one has a greater percentage than the other, then that’s going to be more potential for cost sake, as we’re not just looking at a metal shell of a building.

Tom Brodie [00:46:24]:
So it’s the things that we can look at on these, you know, prospective properties that you want to evaluate and we’ll give our opinion. And so then it’s your decision on which one makes out which, which one would be a better potential purchase. If you’re looking at them, you may think a building’s a building’s a building, but it’s what’s inside and what’s outside that we can identify and say this is what we think we can, we can return for you.

James [00:46:50]:
All right, tell me a story really quick about condos because I see office condos, warehouse condos, those seem to be popping up almost as much as mini malls. So I suppose mini malls, probably a condo as well. How do those come into play with all this?

Tom Brodie [00:47:05]:
This is something that people don’t realize too condo, especially the little office condos that you see, you know, they’re kind of like one story buildings. The individual owns just the inside. Right. So there’s no structure for them to accelerate. So it’s just going to be the inside. So the more it’s built out, then that’s a greater potential that we can actually accelerate. Now it’s not going to be the same size of value. I mean, a lot of these condos, you’re paying a couple hundred thousand for them.

Tom Brodie [00:47:34]:
And there’s no land to deduct either. So it’s just that internal, internal amount. So it just kind of depends on the number of walls and number of individual offices that you have. But that’s definitely something we can do. The difference is in some condos have a land value associated with it. And so if there is, we can look at from the county records, then we have to subtract the land piece. And so that may make one condo in one state a little Bit less of a good candidate than a condo in another state that doesn’t allocate land. And the reason they’re allocating land, that’s how they get the property tax paid for, is they have all the tenants pay some of the property tax because they’ve gotten so much of the land allocated to them.

Tom Brodie [00:48:17]:
But it’s just different. It depends on the state and how they classify that. But yeah, again, you know, an office condo. In fact, I’ve got one client who, his business is setting up these small little offices to sell. It’s a medical device. And so he has these little kind of like a retail office set up in these office condos across the state. And he, I’ve never met the gentleman. He sends me an email, said, here’s the study I want to look at.

Tom Brodie [00:48:45]:
Do your, do your thing and let me know. And so we’ve done those and he’s saved $30,000, $100,000 on some of these condos, which is, for him is awesome because he’s, he’s buying more and more of them. And so those are, those are great, great candidates for cost seg as well.

James [00:49:03]:
Interesting. Is there a gain that you see real estate investors playing where they continue to buy buildings specifically for the bonus depreciation? Is that a thing?

Tom Brodie [00:49:13]:
I mean, it’s not a game. It’s, it’s, it’s reality. Right.

James [00:49:16]:
So, okay, maybe game is the wrong word. That’s. Yeah.

Tom Brodie [00:49:18]:
Game and loophole are not good terms that we. But it’s using the tax law to the biggest benefit. Right. So if you own a property and you’re going to buy another woman, and if you sell that property, you, you’re going to have to pay the tax on the gain. Right. So there’s a thing called a 1031 exchange. This is in within the law. And so you have one property, you’re going to sell it and buy another one, and then you just kind of roll in the gain into your other property.

Tom Brodie [00:49:46]:
So you’re never really realizing it. Right. So you’re deferring the tax implications until you sell. And I’ve had some clients that, I’m never selling a building. I’m always going to do a 1031 exchange and just kind of push in that tax, tax impact further down the road. So, I mean, that’s how people do it. If you’re going to be in the business of buying and selling real estate, you always want to roll it into the next property.

James [00:50:08]:
Gotcha.

Tom Brodie [00:50:08]:
And we can do it. We can do a cost seg. On it once you own it. And then once you buy the new one in the 1031 exchange, it will do the cost seg on the new building. So it can be done.

James [00:50:20]:
Right, on with the 1031. I’m going to ask you a fairly detailed 1031 question because I don’t actually know this one. When you have a property, let’s say $500,000 property, you sell that to buy a million dollar property or whatever, you advance up. If you’ve owned that thing for X number of years, let’s just say 10. So you’ve depreciated quite a bit of it. How does depreciation work with the new property then that you’ve done the 1031 into? Are you rolling some of that depreciation over there?

Tom Brodie [00:50:48]:
Yeah, you are. And that’s called the, it’s called a carryover basis. Right. So whatever is undepreciated in an existing building goes in a carryover basis. And then when you’re looking at a cost segregation, that carryover basis is not eligible for bonus depreciation. Right. And so. But the upside of the new building that you bought, which is higher in value than the building you surrendered, that upside is eligible for bonus, but not the carryover basis that made up part of your total basis.

Tom Brodie [00:51:18]:
So 1031s get real complicated real fast. And a lot of times when we find a property that’s bad been 1031, we have to go back for more information from the client. And a lot of times he has to go back to his cpa. So it’s a lot. It’s not just as simple as what I sold it for and what I bought it for. We just need to know again, that carryover basis and what was your depreciation? It starts getting real complicated. It’s doable, but it’s not as straightforward as just a straight up purchase.

James [00:51:46]:
Fair, fair. You know, it’s funny, I use the nomenclature game because I joked with my old accountant. I’m like, man, I feel like I’m playing a game of Monopoly and I don’t know the rules. And I get told when I’m doing it wrong and if I do it right, nobody says anything. So I assume it’s okay.

Tom Brodie [00:52:05]:
That’s pretty much the way it is. But there was a great quote that came from a Louisiana senator who said, let me get this right now. Yeah, Tax loophole is when somebody else benefits. Tax reform is when you benefit.

James [00:52:25]:
All right, interesting.

Tom Brodie [00:52:27]:
That was Senator Long in Louisiana, and that’s a famous story that, that everyone in the CSSI based in Louisiana likes to use because they said, you know, it’s. It’s not a tax loophole. It’s in the. It’s in the code. You know, it’s, It’s. It’s very much documented. We’re not kind of, you know, taking liberties with the tax code. This is something that they very specifically say, this is how you do it.

James [00:52:49]:
Yeah. You know, it’s interesting because when I told him this, I’m like, why didn’t you tell me about the rules of the game when it came to cost seg? Like, this is a thing you should have. No. Or should I pay you to be able to tell me? But then I learned that is not why I was paying them. I was paying him just some numbers in some software, I guess.

Tom Brodie [00:53:08]:
Yeah. The one thing you have to realize is like this. I always use the kind of the medical metaphor said you wouldn’t ask your. Your general practitioner to perform brain surgery. So asking a CPA to be able to do a cost seg on their own, this. That’s not part of their skill set. I mean, they just. Number one, it’s probably a smaller portion of their book of business.

Tom Brodie [00:53:30]:
The people that actually can benefit from cost seg, so they’re just not exposed to it. And so, you know, you would hope that they would say, I think this applies to you. Let’s go find an expert on it. But sometimes they’re just so busy, they don’t have time to do that either.

James [00:53:44]:
There wasn’t even a mention. I had to tell them that I found it on YouTube.

Tom Brodie [00:53:49]:
Yeah, most people. Most people do that way they find it through someone else or they know someone who did it, and they hear about it from a friend, and then it becomes real to them and they want to find out more.

James [00:54:00]:
Yeah. So interesting. Like, why am I getting my accounting information on YouTube? That shouldn’t happen, shouldn’t have to. But here we are, right on YouTube.

Tom Brodie [00:54:10]:
Yes.

James [00:54:12]:
Awesome. Well, Tom, thank you so much for being on the show.

Tom Brodie [00:54:16]:
Well, I appreciate it. Thank you.

James [00:54:18]:
This has been Authentic Business Adventures, the business program that brings you the struggle stories and triumphant successes of business owners across the land. My name is James Kademan, and Authentic Business Adventures is brought to you by Calls On Call, offering call answering and receptionist services for service businesses across the country. On the web https://callsoncall.com and of course, the Bold Business Book, a book for the entrepreneur and all of us, available wherever fine books are sold. If you’re listening or watching this on the web. If you could do us a huge favor, give us a big old thumbs up. Subscribe and of course, share it with your entrepreneurial friends, especially those friends that may have purchased some commercial property or are in the the searching stages of buying some commercial property because cost segregation may be something that they want to look into. We’d like to thank you. We’re wonderful listeners, as well as our guest, Tom Brodie of Cost Segregation Services.

James [00:55:08]:
Tom, can you tell us that website?

Tom Brodie [00:55:11]:
Yeah, the website is actually my website is https://thefoundmoneyguy.com or it’s a https://cssistudy.com.

James [00:55:19]:
all right. Did you say the found money guy?

Tom Brodie [00:55:22]:
The found money guy. That’s one of the things I kind of call myself. Is this. It is found money. I mean, it’s one of the things you don’t know that you have access to, but you do. So I liken it to when you stick your hand in a pair of jeans and you find some folding money. That’s the best. That’s the best feeling ever.

Tom Brodie [00:55:38]:
Right? So that’s right.

James [00:55:40]:
The winter coat where you find a 20 like, oh, it’s been sitting there six months. Sure.

Tom Brodie [00:55:44]:
Exactly. Exactly.

James [00:55:46]:
That’s awesome. Past episodes can be found morning, noon and night at the podcast thing. Fun to draw in customers dot com. Thank you for joining us. We will see you next week. Want you to stay awesome. And if you do nothing else, enjoy your business.