Case Study: Cost Segregation Analysis for a Gas Station in Lytle, TX

Narrative

In 2023, the owners of a gas station in Lytle, TX undertook strategic tax planning to enhance their investment. The property consists of a single 1-story building originally constructed in 2023.

The gas station features dedicated fuel system equipment and a canopy. The interior is well-appointed with convenience store equipment, millwork, and restaurant equipment. The property also includes site improvements such as paving, sidewalks, curbs, dumpster bollards, and islands.

The owners engaged Engineered Tax Services (ETS) to perform a comprehensive cost segregation study of the property. This study aimed to identify and reclassify specific assets, enabling the acceleration of depreciation and optimizing tax benefits. This case study outlines the cost segregation strategy employed and its significant impact on the financial outlook of the property.

Objective

The primary objective of the cost segregation study was to identify and classify the gas station's assets to optimize the owners' tax savings. By breaking down and reallocating components into shorter depreciation life categories, ETS aimed to provide both immediate and long-term financial benefits through accelerated depreciation.

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