Stainless Steel Manufacturing Facility Cost Segregation Study

Approach & Results

Client Profile
A CPA firm contacted McGuire Sponsel to conduct a retroactive cost segregation study for their client, a metal products manufacturer specializing in stainless steel electrical conduit. The client recently constructed a new manufacturing facility in Greensburg, Pennsylvania, with an investment of approximately $3 million.

Process
The analysis commenced with a thorough on-site inspection on December 12, 2023, coupled with a detailed review of the facility’s blueprints. Given that the building was placed in service in a prior tax year, our Fixed Assets team’s approach included a crucial 481(a) calculation to rectify improper depreciation methods. This additional step allowed for correction without the need to amend previous tax returns, with effects recognized in the current tax year. As part of the comprehensive service, we also provided a draft Form 3115 and accompanying attachment.

Study Results
The cost segregation study was completed on January 16, 2024, delivering exceptional outcomes for the client within a four-week turnaround time. Our team successfully reclassified 25% of the facility’s assets from 39-year property into 5-, 7-, and 15-year property categories. These reclassified assets, all eligible for bonus depreciation, totaled approximately $750,000 of the overall project cost.

The study’s findings significantly exceeded initial projections, increasing the client’s first-year cash flow by an additional $100,000 above expectations. Notably, the client’s return on investment was an impressive 33 to 1 ratio. The first-year increased cash flow was $186,202, and the present value of increased cash flow was $180,008.