Case Study: Cost Segregation Analysis for a Fast-Food Restaurant in Dayton, Texas

Narrative

In 2024, the owners of a fast-food restaurant in Dayton, Texas undertook strategic tax planning to enhance their investment. The property consists of a single-story building encompassing 2,100 square feet. Originally constructed in 2023, the restaurant features modern amenities and equipment designed for efficient food service operations.

The building's exterior showcases a blend of commercial architectural elements, including brick veneer, stucco finishes, and aluminum storefront systems. The interior is well-appointed with specialized restaurant equipment, kitchen facilities, and customer service areas. The property also includes a drive-thru window system and various site improvements for customer parking and access.

Objective

The primary objective of the cost segregation study was to identify and reclassify specific building components into shorter depreciation life categories to optimize tax benefits through accelerated depreciation. The analysis aimed to provide both immediate and long-term financial advantages.

Methodology

ETS employed a detailed, engineering-based approach, which included:

1. Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
2. Document Review: examining architectural plans, construction documents and accounting records
3. Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
4. Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)

Asset Allocation