Study Overview
This case study examines a Golf Course acquired in 2020 for $3,200,000 and applied in the 2023 tax year.
By also leveraging 80% bonus depreciation, the cost segregation study reclassified eligible building components into shorter recovery periods, maximizing upfront tax savings resulting in $883,621 in savings.
|
Property Type |
Golf Course |
|
First-Year Tax Savings |
$883,621 |
|
Date Placed In-Service |
Oct. 2023 |
|
Tax year study applied |
2023 |
|
Bonus depreciation |
80% |
|
Purchase price(less land) |
$3,200,000 |
|
Accelerated Method |
$2,270,151 |
|
Straight-Line Method |
$17,120 |
|
Increased Deduction |
$2,253,031 |
|
Tax Rate |
37% |
Project Overview
A golf course owner completed a cost segregation study, identifying assets eligible for accelerated depreciation. Through a detailed engineering analysis, a significant portion of building costs were reclassified from a 39-year depreciation schedule to much shorter recovery periods, putting money back in the owner’s pocket sooner.
Study Results
The detailed engineering analysis successfully reclassified a whopping 87% of the total building costs into accelerated depreciation categories:
*Also refer to “Building Allocation After Study” Graph Below
Key Reclassified Assets
5-Year Property ($159,136) included:
- Gold carts and cart storage
- Maintenance equipment and machinery
- Carpeting, decorative fixtures, and specialty lighting in clubhouse
- Point-of-sale systems and technology infrastructure
- Furniture and fixtures in the pro shop or restaurant
15-Year Land Improvements ($2,634,994) included:
- Cart paths and walking paths
- Parking lots and paving
- Landscaping and course shaping
- Irrigation and drainage systems
- Outdoor lighting, signage, and fencing
- Retaining walls and decorative hardscaping
Building Allocation After Study
5-Year
$159,136 Re-allocated
15-Year
$2,634,994 Re-allocated
39-Year
$405,920 Re-allocated
Financial Impact
By accelerating depreciation on $3.2 million of the property’s cost basis, the study generated substantial first-year tax deductions and meaningfully improved cash flow. Through the identification of personal property and land improvements, the owner was able to take advantage of:
- Bonus depreciation eligibility on qualifying assets
- Accelerated depreciation schedules on shorter-life property
- Enhanced cash flow through reduced tax liability
- Proper cost basis documentation for future disposition analysis
Building Systems Documentation
The study also included thorough documentation of the property’s building systems, a valuable resource for making informed capitalize-vs.-expense decisions in line with IRS Tangible Property Regulations. This documentation gives property owners:
- Current replacement cost benchmarks for each building system
- Detailed asset inventories by depreciable life
- Support for partial disposition elections on future improvements
- Compliance with IRC Section 1.263(a)-3 requirements
Compliance & Methodology
The study was conducted in full accordance with:
- IRS Revenue Procedure 87-56 asset classification guidelines
- Modified Accelerated Cost Recovery System (MACRS) regulations
- IRC Section 168 property classification standards
- Tangible Property Final Regulations (Treasury Decision 9636)
All asset classifications were supported by site inspection, architectural plans, construction documentation, and established engineering cost analysis standards designed to withstand IRS scrutiny.
Why This Matters
This case study illustrates how golf course owners can unlock meaningful tax savings through a properly executed cost segregation study. By identifying and reclassifying nearly $3.2 million in assets eligible for accelerated depreciation, the property owner captured significant first-year tax benefits, all while remaining fully compliant with IRS guidelines.
Ready to discover your property’s tax savings potential? Contact CSSI today.
