Wildlife Deductions : Land depreciation Taxes

Cost Segregation may sound like a fairly tame discipline but a recent assignment put the Madison SPECS team nose-to-nose with grizzly bears, moose, deer, elk, fish and fowl of all types.

THE SITUATION: LAND IMPROVEMENTS ACCOUNTING

Madison SPECS was called in to do a Cost Segregation study for a shopping mall and its land improvements. The mall's anchor store was a Bass Pro Shop. The previous landlord had granted Bass an allowance of approximately $10 million to decorate and build out its space.

THE CHALLENGE: LOWER LAND DEPRECIATION TAXES

The primary challenge of this assignment was the unusual nature of the eligible assets for depreciation. The decorative items in the Bass Pro shop were eligible for 5-year depreciation-a tax benefit not to be missed. But finding a reliable, objective source for pricing these decorative elements was quite an undertaking.

Included were dozens of stuffed animals, including bears, deer, elk, foxes, Canada geese, turkeys, ducks. There were also indoor and outdoor waterfalls as well as a custom-made 22,000 gallon fish tank!

THE SOLUTION:

To price the stuffed animals accurately, the SPECS team spent hours combing the web and speaking to taxidermists across the country. In the process, they learned a lot about this unique art. The value of a stuffed duck, for example, depends largely on its position. Is the duck sitting? Standing? About to take flight? To determine the value of a bear head, you need to know not only what kind of bear it is, but also whether its mouth is closed or open-and if so, by how much? Issues such as these affect the value of the items and in turn, the outcome of the Cost Segregation study. Using data from RSMeans and M&S, the team was also able to determine the true pricing for the indoor and outdoor waterfalls. To price the custom-made fish tank, SPECS' experts first developed detailed specifications for the tank and then shopped around to see what it would cost to replicate it. Ultimately, they were able to value the tank at approximately $500,000.

THE RESULTS:

SPECS CEO Eli Loebenberg estimates that the study of this shopping mall will generate a net present value tax benefit of close to $1 million.

Not bad for a collection of furry, feathered and finned creatures.