TAXES SAVED: $660,000
Bedford was engaged by the owner of a limited service hotel to conduct a cost segregation study on their facility. The objective was to identify assets that could be moved to a shorter depreciation schedule and save the client taxes.
This 3 story hotel facility and conference center was completed for a total development cost of $10,800,000. The property was awarded the national award of “Best of the Best” by the chain. As such, the property possesses extensive upgrades and high end amenities. Note: The CPA had previously allocated assets of $3,088,000 to shorter lives and was very skeptical that we would be able to improve on those allocations.
Our engineers examined all design and construction documents, contractor payment requisitions and other related data to determine the cost basis for every component in the building. Next, our engineer conducted an on-site study to identify and photograph all assets eligible for accelerated depreciation. Our team (site engineer, costing engineer and tax specialist) then identified assets that qualify as Specialized Use, i.e. outside normal use of that property type.
Estimate of Benefits:
Our pre-engagement estimate showed a potential of $5,250,000 in assets that could be scheduled to shorter depreciable lives. Results: We reallocated an additional $2,593,000 more than the CPA‟s original allocations or an additional 23.9% of the assets to shorter depreciable lives. It total, the study resulted in $5,682,000 (52% of the assets) being reallocated to 5, 7 or 15 year property. As a result, the property owner will save $660,000 in tax payments during the next 10 years.
“The outcome of Bedford‟s work was fabulous, way beyond my expectations. I always thought that my CPA was aggressive with our depreciation, yet, even they were impressed. Our CPA firm said that the scope, accuracy and detail of the study was excellent.” “Bedford‟s people are very professional, knowledgeable, courteous – 1st class. They provided a quality result at a great value.” Ron Ducet, Manchester NH