Projects

Restaurant

Steak House

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, sushi bar, liquor bar and three dining areas. The building has a covered portico that is attached to the building for customer drop-off. The facility has numerous display cases and decorations depicting the Japanese culture. The facility has a cost basis of $964,330 and was placed in service in July 2002.

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 $453,510 or 55% to shorter depreciable lives. The projected tax benefit was $96,393 in NPV savings over the next 10 years with $94,666 in tax savings available for the current tax year.

Results:

The cost segregation study reallocated $461,914 or 47.9% of the assets to shorter recovery periods. As a result, the property owner’s tax savings is projected to be $89,974 in NPV savings over the next 10 years with $76,945 in tax savings available for the current tax year.