|
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.
The tax advisor and client's financial department needed to uncover
a method to mitigate or even delay the pending cash drain anticipated
upon the expiration of bonus depreciation. Bonus depreciation
has allowed the client to realize a significant benefit 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 CFO met with the Accruit team and was introduced to the possibility
of repetitive Like-Kind Exchanges. Accruit team members
visited the client site and evaluated their current business
processes and rental portfolio. Working with the client's
tax advisor, Accruit 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 $2.5 million. The leadership opted to implement the
Accruit Like-Kind Exchange solution immediately.
Result
Because the Like-Kind Exchange program implementation had
the full support of the leadership, 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. The cash windfall enabled the dealership
to solve many other problems, including a ten-fold reduction
in their short term borrowing requirements as well as providing
the necessary capital to finance an upcoming dealership
operating system software upgrade. |
