Case Study: Cost Segregation Analysis for a Medical Dialysis Center in Lawrenceville, GA

Narrative

In 2021, the owners of a medical dialysis center in Lawrenceville, Georgia, undertook strategic tax planning to enhance their investment. The property consists of a single one-story building designed to provide specialized medical services to the community. Originally constructed in 2019, the dialysis center features state-of-the-art medical equipment and facilities designed to serve patients requiring regular dialysis treatment.

The building's exterior showcases durable EPDM roofing and aluminum windows, built on a concrete slab foundation. The interior is well-appointed with specialized medical features including dialysis treatment chairs, medical equipment counters, dedicated medical equipment outlets, and observation windows. The facility also includes laminate wood flooring throughout patient areas, vinyl baseboard, and FRP (Fiberglass Reinforced Plastic) panels for easy maintenance and sanitation. Supporting infrastructure includes a 150kW generator for emergency power, an 800A electrical service, and comprehensive fire sprinkler system.

The owners engaged Engineered Tax Services (ETS) to perform a comprehensive cost segregation study of the property. With a total depreciable basis of $3,254,483 and land value of $711,732, 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 dialysis center'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