Case Study: Cost Segregation Analysis for an Office Highrise in New York, NY

NYC Highrise case study cost segregation


In 2022, the owners of a 14-story office highrise building in New York, NY undertook strategic tax planning to enhance their investment. Originally constructed in 1958.

The building's exterior showcases a blend of modern and classic architectural elements. The interior is well-appointed, featuring high-efficiency HVAC systems, elevators, and contemporary lighting fixtures. Amenities include a restaurant with commercial kitchen equipment.

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.


The primary objective of the cost segregation study was to identify and classify the building'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.


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)

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Asset Allocation

5-Year Class Life

Total Depreciation Allocation: $13,835,663.26 Percentage of Total Depreciable Basis: 21.35%

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

  • Beverage equipment
  • Decorative millwork
  • Restaurant decor and furniture
  • Kitchen equipment and plumbing hookups
  • Decorative lighting
  • Computers and data handling equipment

39-Year Class Life

Total Depreciation Allocation: $50,964,336.76 Percentage of Total Depreciable Basis: 78.65%

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

  • Building structure (walls, roof, floors)
  • HVAC and plumbing systems
  • Elevators
  • Fire protection and alarm systems
  • General lighting and electrical
  • Restroom accessories and partitions

Class Life Details:


The cost segregation study for this office highrise in New York, NY 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 building'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.

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