Cost Segregation Case Study

Optimizing Cash
Flow for Fast Food Restaurants Owners

$1,335,000

Property Purchase Price

$243,296

1st Year Tax Savings

100%

Bonus Depreciation

Property Overview

This case study analyzes a Fast Food Restaurant acquired in August 2020 for $1,335,000(excluding land). The study was applied to the 2020 tax year, utilizing a 37% tax rate and an 8% present value rate of return.

With 100% bonus depreciation, the facility’s owners were able to maximize their upfront tax benefits, reducing taxable income and enhancing cash flow. The cost segregation study strategically categorized building components into shorter depreciation periods, creating significant tax savings opportunities.

Property TypeFast Food Restaurant
Purchase price(less land)$1,335,000
Building sqft2,325
Entire site sqft39,030
Data acquiredAugust 2020
Tax year study applied2020
Tax rate37.0%
Present value rate of return8%
Bonus depreciation100%

Building Allocation After Study

Cost Segregation Study Benefits

The cost segregation study provided significant tax savings for the hotel property, delivering an impressive $243,296 in tax savings within the first year. Over a 10-year period, the net present value (NPV) of savings reached $204,907, while the total NPV over the remaining life of the property amounted to $166,400. When reinvested, these savings equate to a future value of $3,347,189.

Additionally, the study reallocated building components into accelerated depreciation categories, with $264,225 assigned to 5-year property, $399,725 to 15-year property, and $691,050 to 39-year property, allowing for substantial upfront deductions and improved cash flow.

Financial Benefits Achieved

Immediate Tax Savings$243,296
NPV Over 10 Years$204,907
NPV Over Remaining Life of Property$166,400
Future Value of Invested Savings$3,347,189

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