California Auto Dealership Cost Segregation Study

Approach & Results

Client Profile
A privately held automotive retail company engaged McGuire Sponsel following its acquisition of a large auto dealership property in Laguna Niguel, California. The $48 million purchase represented a strategic investment in the company’s continued growth and regional presence in Southern California.

Process
McGuire Sponsel’s Fixed Asset Services team conducted a comprehensive cost segregation study to identify building components that qualified for shorter depreciation recovery periods.

Our team completed an on-site inspection and reviewed available architectural, construction, and property documentation. Using an engineering-based analysis, our specialists evaluated the property’s components and reclassified qualifying assets from 39-year property into shorter-lived asset categories.

The engagement began approximately three months after the property’s July 2, 2024, acquisition. We completed the site visit within 20 days of engagement and finalized the study on November 26, 2024, allowing the client to incorporate the results into its timely tax planning.

Study Results
The cost segregation study reclassified 28% of the property’s depreciable basis from 39-year property into shorter recovery periods. This accelerated the client’s available depreciation deductions and generated more than $2.52 million in first-year cash flow.

The results exceeded our initial first-year cash-flow projection by $537,759. Over the life of the investment, the net present value of the projected cash-flow benefits exceeded $2.1 million.