Pharmaceutical Manufacturer Receives $3.6 Million Dose of Present Value Tax Savings
A pharmaceutical company planned construction of a new lab and office space in one of its properties. It leased the space where the remodeling was taking place, and the project was projected to incur $55 million in leasehold improvements.
To create the lab required the installation of specialized electrical and ventilation work as well as specially fixtures and finishes. The amount of materials involved and the size of the project made the manufacturer a good fit for a cost segregation study.
Our team examined the building plans, tax filings and depreciation schedules to classify qualifying assets into shorter 5, 7 and 15-year depreciation lives. The pharmaceutical-specific electrical and ventilation components had a shorter depreciation life than standard building components, which allowed unique opportunities for the manufacturer to accelerate the depreciations into earlier periods.
The manufacturer noticed its tax benefits immediately. In its first year, the present value basis of its savings was $1.2 million, and the cumulative present value of its savings reached $3.6 million.
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