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Primary concern: In the years 2002 through
2004 the client took advantage of Bonus Depreciation. This
created additional cash flow for those years but the expiration
of Bonus in January 2005 meant the client would soon have to
pay that benefit back.
Challenge
The client's financial department and tax advisor were challenged
by leadership to uncover a method to mitigate or even delay the
pending cash drain anticipated upon the expiration of bonus depreciation.
The company had realized a significant benefit by taking bonus however the
existing positive benefit would be greatly reduced if additional credit had
to be secured to pay back the benefit of bonus depreciation.
Solution
The client's CFO met with Accruit at an industry trade show and
was introduced to the concept of repetitive Like-Kind Exchanges.
Accruit team members were invited to the client site to evaluate
their current business processes and rental portfolio. The
Accruit team, working with the client's tax advisor, completed
a detailed assessment and benefit calculation which was presented
to the company leadership. Leadership immediately recognized
that Accruit's Like-Kind Exchange solution not only accomplished
their goal of halting the negative impact of bonus depreciation
expiring, but also expanded that benefit by $13 million. The
team decided to implement the Accruit Like-Kind Exchange solution
and gave it the highest priority among current projects within
the dealership.
Result
Because the Like-Kind Exchange program implementation had
the full support of senior management, the project was completed
on time and under budget. Instead of the forecasted cash
flow shortage the company had been preparing for, they experienced
a cash windfall. This windfall solved many other problems
facing the dealership, including a ten-fold reduction in their
short term borrowing requirements as well as providing the necessary
capital to finance their upcoming dealership operating system
software upgrade. |
