The subject is a newly constructed auto dealership that was placed-in-service in 2019 for $9,200,000. The building includes 10 service bays, a customer’s waiting area, a showroom, a parts department with a metal plank mezzanine, and administrative offices. There were also site improvements such as asphalt paving, landscaping, fencing, sidewalks, site drainage and site lighting.
The building is a one-story, steel frame structure, with exterior metal paneling and aluminum storefront windows with a metal roof. Interior finishes include tile flooring, decorative millwork and acoustical ceiling tiles.
The Source Advisors Cost Segregation engineers were engaged to analyze the actual construction costs, in the form of contractor invoices, and allocated the cost detail to various trades and building components. They conducted detailed estimates from the construction drawings and augmented those findings with additional estimates performed during the site visit of the property. Key property personnel were also interviewed. A detailed report was delivered, identifying and documenting all of the components that qualify for a shorter tax life.
Source Advisors reclassified 26% or $2,392,000 as 15-year land improvements and 20% or $1,840,000 as 5-year tangible personal property. This property benefited from the high ratio of land improvements, in the form of extensive parking lots and lighting, to the overall cost of construction. It qualifies for 100% bonus depreciation under the Tax Cuts and Jobs Act.
% OF RECLASSIFIED PROPERTY
|Increased Depreciation in 1st year||$2,984,152|
|Increased Depreciation in years 1-5||$2,550,119|
|Increased Cash Flow in 1st year||$1,193,661|
|Increased Cash Flow in years 1-5||$1,020,047|
|Net Present Value over 39 years||$324,510|
*Assuming a 35% tax rate, 6% discount rate, and that the property will be held for 39 years