Projects
Retail
Supermarket
Engagement Overview:
Bedford was engaged by a real estate developer to conduct a cost segregation study for one of their affiliates. The objective of the study was to identify assets that could be moved to shorter recovery periods in order to accelerate depreciation and defer taxes.
Property Overview:
The property was a former industrial facility that had been abandoned. The project included the demolition of the former structures. This newly constructed facility has a cost basis of $10,137,304 and was placed in service as a supermarket by the current owner in October 2005.
Engineering Process:Supermarket
Our engineers examined all the design and construction documents, contractor payment requisitions and other related data to determine the cost basis for every component of the building. Next, our engineer conducted an on-site study to identify, measure, quantify and photograph the existence of all assets eligible for accelerated depreciation. Finally, our team (on-site engineer, senior engineer and tax specialist) identified assets eligible for 30% bonus depreciation, reviewed the cost segregation study and certified its completeness and accuracy.
Estimate of Benefits & Savings:
The pre-engagement estimate we provided to the client showed a potential reallocation of $4,700,000 or 47% to shorter depreciable lives. The projected tax benefit was $1,338,750 in NPV savings over the next 10 years with $1,243,947 in tax savings available for the current tax year.
Results:
The cost segregation study reallocated $5,310,000 or 53.1% of the assets to shorter recovery periods. As a result, the property owner’s tax savings is projected to be $1,269,663 in NPV savings over the next 10 years with $1,053,325 in tax savings available for the current tax year.