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Case Studies

Cost Segregation for a Fitness Center

A Comprehensive Source Advisors Case Study

Cost Segregation for Fitness Centers

Tax matters related to fitness facilities can be quite complex. This case study reveals how Source Advisors skillfully converted the purchase costs of a contemporary fitness center into notable tax advantages.

About the Fitness Center

The subject property is a 32,000 square foot fitness center that was acquired in 2015 for $2,300,000.

The building is a one-story, steel frame structure, with an elastomeric membrane roof, and with brick and EIFS veneer.

Property Breakdown

Interior finishes include ceramic tile, rubber flooring, wood flooring, mirrored walls, and paint.

The interior is wired for television and fitness equipment, and is also furnished with a sauna, swimming pool and basketball court. Site improvements include asphalt and concrete pavement, steel railings, and landscaping.

The Challenges

A fitness center, with its blend of standard and specialized components, requires a nuanced approach to cost classification.

Notably, with an indoor swimming pool – while the pool structure might be considered a permanent fixture, its equipment can be classified differently. Ensuring such specifics are addressed correctly is vital to optimizing tax savings.

The Source Advisors Solution

Source Advisors Cost Segregation engineers were engaged to analyze the acquisition cost. They then applied a cost model to allocate the purchase price to various trades and building components.

Our engineers conducted a thorough inspection of the property where estimates were performed. Key property personnel were also interviewed. A detailed report was delivered, identifying and documenting all the components that qualify for a shorter tax life.

Financial Results

Following this extensive examination, Source Advisors accomplished:

10% or
$230,000

Reclassified as 15-year land improvements

19% or
$440,000

marked as 5-year tangible personal property.

The findings were in line with standard expectations for such a facility. While the indoor pool was seen as structural, its equipment was deemed eligible for personal property classification. Thanks to its acquisition date, the property can leverage 50% bonus depreciation under the PATH Act.

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Don’t leave money on the table. Contact Source Advisors to find out how Cost Segregation can work wonders for your bottom line.

Discover the Source Advisors Difference

Our industry experience with cost segregation has helped businesses claim billions of dollars in tax credits and incentives.

Expert Analysis

Our engineers excel at delineating construction costs to yield the highest tax benefits.

Proven Track Record

Our 40-year history of achieving substantial tax credit savings for clients across various industries is a testament to our commitment and expertise.

Precision

Our thorough reporting ensures every qualifying cost is adeptly reclassified.

Seamless Client Experience

Our dedicated support team is readily available to guide you through every step of the process, ensuring a smooth and stress-free experience.

Legally Robust

Our recommendations stand in full compliance with tax legislations, offering clients unmatched peace of mind.