The auto dealership industry has historically benefited tremendously from Cost Segregation studies. The facilities benefit from large amounts of land improvements and decorative interior features which aid in optimizing depreciation deductions. Recently, the auto manufacturing industry has incentivized existing dealership facilities to update and/or rebrand the facility to improve the showroom and exterior façade. The 263(a) Repair Regulations have greatly benefited the dealership industry through partial dispositions and repair expenses.
In addition, newly constructed or renovated facilities in excess of 30,000 square feet can qualify for additional benefit by conducting a 179D study. This focuses on energy efficient improvements made to the building envelope, HVAC, and lighting systems. McGuire Sponsel takes a “big picture” approach with every project to deliver maximum benefit.
Success Story: Renovation
The experts at McGuire Sponsel reviewed an $8.5 million auto dealership in West Virginia that was acquired in 2015. The facility underwent a $3.1 million renovation in 2018. Our team identified assets that were present at the time of acquisition which resulted in a $285,277 increase to the first year cash flow. The second phase focused on the new construction and any assets that were partially disposed of during the renovation. This included assets like ceramic tile flooring, ceiling tiles, light fixtures, and partitions. The second phase generated an additional $987,532 of increased cash flow in 2018.
Success Story: Acquisition
Our team was contacted to perform a cost segregation study on a $2.5 million auto dealership in North Carolina. The study identified short-life assets such as removable glass partitions, ceiling speakers, decorative millwork, decorative light fixtures, and sales cabinetry. The result was an increase in the first year cash flow of $176,566.