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

Occasionally we hear from clients that their accountants have already performed a Cost Segregation Study, so they do not need another. In almost every case where the client decides to get a no-cost analysis from us, we are able to find additional benefits by utilizing our unique skills that a CPA just does not have. This is the second in a series of blog posts covering “New Construction” studies.

New Construction – Office Building Before the study, the accountant had identified $95,000 worth of assets as 5-year property and $113,875 as 15-year property. When our engineers completed their study we found that $684,000 was eligible to be classed as 5-year and $684,000 as 15-year property. The first year savings for the client totaled $49,015, and the cost-benefit of doing the study was 4:1.

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, break room area sinks, demountable wall systems, and folding partitions. Examples of 15-year property included landscaping, irrigations system, site utilities, site paving, and site excavation.

Before Study:                                                   After Study:
Total assets:                 $ 4,009,000              Total assets:                 $ 4,009,000
5-year assets:               $      95,125               5-year assets:               $    684,305
15-year assets:              $    113,875              15-year assets:              $    531,695
39-year assets:              $ 3,800,000            39-year assets:              $2,793,000

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