Projects

Restaurant

Franchise

Engagement Overview:

Bedford was engaged by a restaurant owner to conduct a cost segregation study for one of their locations. 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 facility consists of a single building with a full commercial kitchen, bar, dining area. There is a minimal amount of asphalt and landscaped areas around the building. This restaurant was placed in service in October 1993 and has a total cost basis of $1,809,851.

Engineering Process:

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) 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 $966,920 or 55% to shorter depreciable lives. The projected tax benefit was $162,402 in NPV savings over the next 10 years with $219,144 in tax savings available for the current tax year.

Results:

The cost segregation study reallocated $1,026,185 or 56.7% of the assets to shorter recovery periods. As a result, the property owner’s tax savings is projected to be $171,800 in NPV savings over the next 10 years with $226,613 in tax savings available for the current tax year.