Narrative
In 2023, the owners of a warehouse in Colbert, Oklahoma, undertook strategic tax planning to enhance their investment. The property consists of a single 1-story building encompassing 37,823 square feet. Originally constructed in 2013, the warehouse features a variety of storage and office spaces designed to cater to the needs of the business.
The building's exterior showcases durable metal sandwich panels and corrugated metal fencing. The interior is well-appointed, featuring amenities such as high-efficiency metal halide lighting, acoustic ceilings, and ceramic tile flooring in certain areas. The property also includes land improvements such as concrete paving, sidewalks, and an aggregate parking area.
The owners engaged Engineered Tax Services (ETS) to perform a comprehensive cost segregation study of the property. This study aimed to identify and reclassify specific assets, enabling the acceleration of depreciation and optimizing tax benefits. This case study outlines the cost segregation strategy employed and its significant impact on the financial outlook of the property.
Objective
The primary objective of the cost segregation study was to identify and classify the warehouse's assets to optimize the owners' tax savings. By breaking down and reallocating components into shorter depreciation life categories, ETS aimed to provide both immediate and long-term financial benefits through accelerated depreciation.
Methodology
ETS employed a detailed, engineering-based approach, which included:
- Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
- Document Review: examining architectural plans, construction documents and accounting records
- Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
- Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)
Learn More About Cost Segregation
Explore the benefits of cost segregation and how it can enhance your property's profitability. Dive deeper into our strategies.
Discover MoreAsset Allocation
5-Year Class Life
Total Depreciation Allocation: $49,138.74
Percentage of Total Depreciable Basis: 6.0%
5-year class life assets identified in this study include:
- Computer connections and telephone equipment
- Warehouse and office equipment outlets
- Ceiling fans and security cameras
- Cabinetry and countertops
- Certain interior finishes and coverings
15-Year Class Life
Total Depreciation Allocation: $145,764.36
Percentage of Total Depreciable Basis: 17.8%
15-year class life assets identified in this study include:
- Pre-cast concrete screen walls
- Aggregate paving and concrete sidewalks
- Rolling entrance gate and metal fencing
- Bollards
39-Year Class Life
Total Depreciation Allocation: $625,096.90
Percentage of Total Depreciable Basis: 76.2%
39-year class life assets identified in this study include:
- Structural components (walls, roofing, slab)
- Building systems (HVAC, plumbing, electrical)
- Restroom fixtures and partitions
- Doors, windows, and overhead doors
- Lighting fixtures
Class Life Details:
Summary
The cost segregation study for this warehouse in Colbert, Oklahoma 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 warehouse'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 real estate investments.
Unlock Your Tax Savings
Discover how cost segregation can maximize your tax benefits and improve cash flow. Get started today with a free consultation.
Get Your Free Consultation