Food Processing Facility Cost Segregation Case Study

Food Processing Facility, Maximize Your Tax Strategy

What is Cost Segregation
Cost segregation is an effective tax planning strategy that helps businesses and individuals involved in constructing, purchasing, expanding, or renovating real estate reduce their tax liabilities by accelerating depreciation deductions, which allows for the deferral of both federal and state income taxes.

Food Processing Facility
For food processing facilities, it can be particularly beneficial by allowing the accelerated depreciation of specialty equipment, such as cold storage systems, power infrastructure, HVAC, and plumbing. The following case study demonstrates how accelerated depreciation can provide significant tax savings, showcasing the advantages for properties like apartment buildings, and highlighting how similar benefits can be realized for food processing operations with complex infrastructure.

Practical Example

The following case study highlights the benefits of accelerated depreciation, demonstrating how similar advantages can be realized for food processing facilities with specialized infrastructure and operational equipment. By optimizing the depreciation life of the facility and its assets for tax efficiency, these strategies can help reduce taxable income, increase cash flow, and improve overall financial performance for food processing plant owners and operators.

Building information

○ Building Type 🡪 Casino
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 187,500 SF
○ Study Scope: 🡪 Acquisition
○ Condition: 🡪 New
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $20,000,000
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $9,247,738

○ RNPV Over Remaining Life of Property: 🡪 $2,724,119

○ Net Present Value (NPV) Over 10 Years: 🡪 $2,573,180

Building Allocation After Study

5 Year Property

Depreciable Basis: $1,791,907at %9

7 Year Property

Depreciable Basis: $447,977 at 2%

15 Year Property

Depreciable Basis: $1,576,617 at 8%

39 Year Property

Depreciable Basis: $16,183,499 at 81%

Total

Depreciable Basis: $20,000,000 at 100%

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Cost Segregation Case Study – Food Processing Facility