American Appraisal performs a “look-back” cost segregation study for multiple manufacturing facilities…and achieves a payback ratio of nearly 40 times the fee.
AOT Bedding Super Holdings, LLC, owner and manager of Serta for several years, acquired Simmons Bedding Company in 2010. Over the years, Simmons had benefited from having cost segregation studies performed on various properties; these studies, which assist companies in identifying and segregating real and personal property into the appropriate asset classes in accordance with IRS guidelines, can result in substantial federal income tax savings. The Serta properties had not previously been the subjects of cost segregation studies, and American Appraisal was engaged to analyze these properties for cost segregation purposes.
Fortunately, American Appraisal’s cost segregation services can be applied regardless of project type or status – from new construction planning to post-acquisition and retrospective. American Appraisal completed look-back studies for 17 Serta facilities in 16 states, consisting primarily of manufacturing facilities and also including the corporate headquarters/R&D facility. Our analyses included all site improvements, buildings, and applicable personal property. We inspected the facilities, analyzed construction drawings, estimated and adjusted replacement/reproduction costs, segregated the items into property units and assigned class lives.
Our look-back studies indicated that many of Serta’s assets could be appropriately classified into shorter tax life classes, resulting in both significant tax savings and cash flow benefits. To further assist our client, we facilitated the calculation of the Internal Revenue Code Section 481 adjustment, which represents the catch-up depreciation as a result of the change in tax class lives, as well as the preparation of Form 3115, Application for Change in Accounting Method. The result was a payback of nearly 40 times the fee for the service.
Serta’s vice president said, “American Appraisal led a talented staff in performing a high-quality asset analysis for Serta, with minimal disruption to any of our facilities. The results of their study were of great help. . .”
Read more about our cost segregation services