Case Study: Cost Segregation Analysis for a Storage Warehouse in Carrollton, GA

Narrative

In 2024, a comprehensive cost segregation study was conducted on a storage warehouse facility in Carrollton, Georgia. The property consists of an 11-building complex encompassing 50,806 square feet with 228 tenant spaces. Originally constructed in 1990, the single-story warehouse facility features both storage and commercial space.

The property underwent significant improvements and was acquired in August 2024 for $4,250,000, with a depreciable basis of $3,113,550 (excluding land value of $1,136,450). The facility includes modern amenities such as climate-controlled storage units, security systems, and various building improvements designed to enhance functionality and tenant experience.

Objective

The primary objective of the cost segregation study was to identify and reclassify building components into shorter depreciation life categories, thereby accelerating depreciation deductions and improving cash flow for the property owner. The analysis aimed to properly allocate costs between § 1250 real property and § 1245 personal property.

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 Depreciation Allocation: $126,273.85 Percentage of Total Depreciable Basis: 4.06%

5-year class life assets identified in this study include:

• Computer connections
• Security systems
• Office equipment
• Break room equipment
• Telephone systems

7-Year Class Life

Total Depreciation Allocation: $1,189,789.32 Percentage of Total Depreciable Basis: 38.2%

7-year class life assets identified in this study include:

• Metal self-storage units
• Roll-up doors
• Partitions
• Storage building components

15-Year Class Life

Total Depreciation Allocation: $1,189,789.32 Percentage of Total Depreciable Basis: 33.7%

15-year class life assets identified in this study include:

• Paving
• Site lighting
• Fencing
• Concrete work
• Land improvements

39-Year Class Life

Total Depreciation Allocation: $747,244.15 Percentage of Total Depreciable Basis: 24%

39-year class life assets identified in this study include:

• Basic building structure
• Structural walls
• Foundation
• Roof system

Class Life Details:

Summary

The cost segregation study for this farm in Texas demonstrates the substantial financial advantages of strategic tax planning. By reclassifying property components into shorter depreciation categories, the study enabled accelerated depreciation, resulting in maximized tax savings and improved cashflow. This approach not only enhanced the farm's profitability but also allowed for more efficient capital management and future property upgrades. The case study illustrates how cost segregation can significantly boost the financial performance of agricultural real estate investments.