Mazars was asked to help a client review their Property Improvement Plans (PIP) for 25 hotel properties, totaling over $6.5 million in costs, in order to properly identify repair and maintenance write-offs and to assign the appropriate depreciable
for capitalized costs for federal income tax purposes. Because the client had recently purchased these hotels, they also needed assistance with gathering the cost information from the various hotels into one central database.
How Mazars helped
Our team gathered the disbursement forms for the 25 hotel properties’ accounting systems and consolidated this cost information into one comprehensive database. We then collected all the necessary invoice details and had discussions with each property’s project managers to properly classify the costs as either repairs and maintenance expenses or as capital improvements. Within the capital improvement costs, we further segregated assets into their proper federal depreciation class lives.
Mazars was able to identify approximately $1.8 million in repair expenses for the client and moved approximately $4.2 million of costs to either QIP, Land Improvements, or Personal Property, all of which qualified for bonus depreciation. This study resulted in an NPV saving of approximately $1.5 million and an additional first year business and depreciation expense of $5.2 million.
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The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.