Narrative
In 2023, the owners of a standalone restaurant in Venice, FL, undertook strategic tax planning to enhance their investment. The property consists of a single 1-story building encompassing 5,031 square feet. Originally constructed in 1984, the restaurant features a dining area, kitchen, and restrooms designed to cater to a variety of guests.
The building's exterior showcases a blend of modern and classic architectural elements, including a durable stucco over masonry finish and large glass block windows. The interior is well-appointed, featuring amenities such as high-efficiency HVAC systems, commercial kitchen equipment, and contemporary lighting fixtures.
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 restaurant'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:
- Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
- Document Review: examining architectural plans, construction documents and accounting records
- Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
- Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)
Learn More About Cost Segregation
Explore the benefits of cost segregation and how it can enhance your property's profitability. Dive deeper into our strategies.
Discover MoreAsset Allocation
5-Year Class Life
Total Depreciation Allocation: $353,232.11
Percentage of Total Depreciable Basis: 28.95%
5-year class life assets identified in this study include:
- Kitchen equipment (stainless steel countertops, dishwasher, exhaust hood, etc.)
- Flooring (carpet, quarry tile)
- Decorative lighting (pendant fixtures, recessed downlights)
- Restroom accessories
- Specialized electrical connections
15-Year Class Life
Total Depreciation Allocation: $211,352.40
Percentage of Total Depreciable Basis: 17.32%
15-year class life assets identified in this study include:
- Site improvements (concrete paving, curbs, landscaping)
- Exterior lighting (pole lights, wall packs)
- Signage (monument sign, building signage)
- Decorative fencing (dumpster gate)
39-Year Class Life
Total Depreciation Allocation: $655,415.50
Percentage of Total Depreciable Basis: 53.72%
39-year class life assets identified in this study include:
- Building structure (foundation, walls, roof structure)
- HVAC systems
- Plumbing and electrical rough-ins
- Doors, windows, and interior partitions
- Restroom fixtures
Class Life Details:
Summary
The cost segregation study for this restaurant in Venice, FL, demonstrates the substantial financial advantages of strategic tax planning. By reclassifying property components into shorter depreciation categories, the study enabled accelerated depreciation, resulting in maximized tax savings and improved cashflow. This approach not only enhanced the restaurant's profitability but also allowed for more efficient capital management and future property upgrades. The case study illustrates how cost segregation can significantly boost the financial performance of real estate investments.
Unlock Your Tax Savings
Discover how cost segregation can maximize your tax benefits and improve cash flow. Get started today with a free consultation.
Get Your Free Consultation