How an Engineering Based Cost Segregation Study can Increase Cash Flow for a Retail Building (New Construction)

We often work with accounting firms to help them maximize the benefits to their clients. Teaming up with accountants to provide engineering based Cost Segregation Study works to the advantage of everyone. The client in this case was able to maximize their benefit and the accounting firm retained the status of trusted advisor. This is the third in a series of blog posts covering how we can collaborate to bring the total advantage to the client.

Retail Building New Construction
As part of the review of construction costs, the accounting firm had identified $132,085 as 5-year property and $175,915 as 15-year property. This firm came to us to see if we could identify more. The results of the study proved that this was beneficial for the owner. The end result of the study was a classification of $882,297 as 5-year property and $665,505 as 15-year property. The first year savings for the client totaled $274,908, and the cost-benefit of doing the study was 25:1.

In this case, examples of assets reclassified as 5-year property were carpet and vinyl flooring, cabinetry, vinyl wall coverings, décor items (lighting, bulkheads, wood work), electrical for office equipment, equipment plumbing, product storage (coolers/freezers) and associated refrigeration, as well as all signage.

Before Study:                                                   After Study:
Total assets:                 $ 4,708,000              Total assets:                 $ 4,708,000
5-year assets:               $    132,085              5-year assets:               $    882,297
15-year assets:              $    175,915              15-year assets:             $   665,505
39-year assets:              $ 4,400,000            39-year assets:             $ 3,160,198

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