Food Manufacturing Facility

Approach & Results

Client Profile
A CPA firm engaged McGuire Sponsel to conduct a cost segregation study for a vinegar manufacturer that recently completed construction of a new $16 million food manufacturing facility in Jefferson, Georgia. The company sought to optimize its tax strategy for this significant investment in its production capabilities.

Process
Our Fixed Assets team was brought in at the start of construction, allowing us to begin blueprint analysis well before the facility was placed into service. This early involvement enabled a much faster turnaround time for the completed study.

We conducted a comprehensive on-site inspection and detailed blueprint review, meticulously examining the property and all relevant documentation. This thorough approach allowed for precise identification and reclassification of assets into shorter depreciation categories.

Study Results
We completed the cost segregation study within two weeks of receiving the final construction costs. Our Fixed Assets team successfully reclassified nearly 60% of the facility’s assets from 39-year property into 15-, 7-, and 5-year tax lives. These reclassified assets, all eligible for bonus depreciation, accounted for approximately $9.5 million of the total project cost. We exceeded the projected first-year increased cash flow by $1 million, totaling over $2,927,000 and the present value of increased cash flow exceeded $2,830,000. The return on investment for the client was an impressive 281 to 1, demonstrating the substantial value of our study.