Case Study: Cost Segregation Analysis for a Self-Storage Facility in Evanston, Wyoming

Narrative

In 2022, a self-storage facility in Evanston, Wyoming underwent a cost segregation study to optimize its tax position. The property consists of two single-story metal buildings constructed in 2022. The total depreciable basis of the property is $1,514,677.53.

The facility features modern construction elements including structural steel components, electrical systems, and specialized lighting fixtures. The property includes both interior and exterior improvements designed to provide secure, accessible storage solutions.

Engineered Tax Services (ETS) conducted a comprehensive cost segregation study to identify and reclassify specific assets, enabling accelerated depreciation and optimizing tax benefits.

Objective

The primary objective was to identify and reclassify building components into appropriate depreciation categories to maximize tax savings through accelerated depreciation. The study aimed to provide both immediate and long-term financial benefits through strategic asset classification.

Methodology

ETS employed a detailed, engineering-based approach, which included:

1. Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
2. Document Review: examining architectural plans, construction documents and accounting records
3. Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
4. Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)

Asset Allocation

5-Year Class Life

Total Allocation: $16,795.60 Percentage of Total Basis: 1.11%

Components included:

• Electrical service equipment
• Emergency lighting systems
• Exit signage
• Specialized electrical components

7-Year Class Life

Total Allocation: $631,371.47 Percentage of Total Basis: 41.68%

Components included:

• Structural steel elements
• Interior lighting systems
• Emergency battery systems
• Building materials

15-Year Class Life

Total Allocation: $866,510.47 Percentage of Total Basis: 57.21%

Components included:

• Concrete work
• Site utilities
• Site work
• Foundation elements

Class Life Details:

Summary

The cost segregation study identified significant opportunities for accelerated depreciation. The analysis resulted in:

First-year bonus depreciation opportunities on qualified assets

Total depreciable basis: $1,514,677.53

Accumulated depreciation difference: $1,470,984.90