A Case Study

Let's assume that Bertram Distribution Services purchased an office/warehouse facility in the current year for $2.4 million with $.4 million being allocation to land.  Without a Cost Segregation Study, for federal income tax purposes the $2 million building cost would be required to be depreciated over 39 years using the straight-line method.  This is because in the absence of a CSS there would be no basis for unpacking qualifying property like existing landscaping, electrical distribution system, parking lot, etc.
With a CSS, elements of the building cost can be depreciated over their applicable shorter depreciable lives. Assuming no additional first year depreciation, we see the effects in the Table above of having a Cost Segregation Study performed in the current year.


Before the CSS, the taxpayer must depreciate the entire $2 million over 39 years as real property. As a result of the study, $200,000 of the costs can also be depreciated as real property, but now using a 15 year life. Costs such as site improvements, parking lot pavement, landscaping improvements, etc. qualify for this treatment. In addition, another $150,000 can be depreciated over 5 or 7 year lives as personal property. Some of the costs qualifying for this treatment include portions of electrical, plumbing, and HVAC, interior bumpers and fencing, signage, telephone systems, etc.


The result is that the taxpayer has accelerated $212,806 of depreciation in the first 15 years that otherwise would have been depreciated straight-line over the remaining 24 years. The additional cash flow generated through tax savings over this period is $85,122. The Net Present Value of these cash flows using an 8% rate at a combined tax rate of 40% is $74,220. After considering the after-tax cost of the study, the Return on Investment is 22.8 to 1. 


The benefits of a study are even larger if it falls within the bonus depreciation time period(s).


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We provide no obligation estimates on the Estimated Net Present Value and fixed Fee to perform a Cost Segregation Study for your building.  Go to No Obligation Estimate page or call Randy Vesco at (440) 333-1900 for a free consultation.

Why Vesco Cost Segregation Services?

We have helped Clients significantly improve their cash flow by performing Cost Segregation Studies on properties across the United States that use only methods permitted by IRS Revenue Rulings, Revenue Procedures and Case Law developed through related Tax Court cases and conform to guidance provided by the IRS Cost Segregation Audit Techniques Guide.


Contact Information

Vesco Cost Segregation Group

Randy Vesco

841 Hamlet Lane, A-2

Westlake, OH 44145

(440) 333-1900

Fax (440) 333-1983