Narrative
In 2025, the owners of a farm property in Talent, Oregon, undertook strategic tax planning to enhance their investment. The property consists of agricultural structures and land improvements designed for commercial farm use and improved with specialized systems and site enhancements. The facility was developed with high-quality materials and workmanship suited for long-term agricultural operations.
The property features durable structures, specialized mechanical systems, and custom improvements that support farm functionality. Site elements include extensive land improvements, utility infrastructure, and related enhancements that add value and utility to the overall property. Each component was evaluated as part of a detailed engineering-based cost review.
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 to accelerate depreciation and optimize tax benefits. This case study outlines the cost-segregation strategy employed and its significant impact on the property's financial outlook.
Objective
The primary objective of the cost segregation study was to identify and classify the commercial property’s assets within the $3,570,454.91 depreciable basis. By analyzing and reallocating building and site components into appropriate depreciation categories under MACRS, Engineered Tax Services (ETS) aimed to accelerate depreciation deductions and enhance the property owner’s overall tax savings and cash flow.
Methodology
ETS utilized a detailed engineering-based approach, including:
- Site Inspection: A physical inspection to document all structural, electrical, and land-improvement components.
- Document Review: Analysis of architectural plans, contractor invoices, and accounting schedules.
- Cost Analysis: Allocation of construction costs across building systems, site improvements, and personal property.
- Depreciation Calculation: Application of IRS Revenue Procedures, Tax Court rulings, and MACRS recovery periods to maximize allowable deductions.
Learn more about cost segregation benefits and how it can enhance your property's profitability. Dive deeper into our strategies.
Asset Allocation
5-Year Class Life
Total Depreciation Allocation: $363,936.49 Percentage of Total Depreciable Basis: 10.19%
5-year class life property consists of tangible personal property found across the farm assets that are eligible for a 5-year recovery period.
- Specialized agricultural equipment and fixtures.
- Short-lived assets and components dedicated to specific farm functions.
7-Year Class Life
Total Depreciation Allocation: $949,676.42 Percentage of Total Depreciable Basis: 26.60%
7-year class life property includes certain furniture, fixtures, and other specialized equipment not classified as 5-year property, allocated across the farm's operational areas.
- Agricultural machinery and specialized systems classified under a 7-year ADR class.
- General-purpose fixtures and operational furnishings.
15-Year Class Life
Total Depreciation Allocation: $169,854.13 Percentage of Total Depreciable Basis: 4.76%
15-year class life property consists primarily of land improvements and exterior site systems qualifying for accelerated recovery.
- Site improvements such as paving, fencing, and exterior lighting.
- Drainage systems and other land-related infrastructure.
20-Year Class Life
Total Depreciation Allocation: $1,905,459.18 Percentage of Total Depreciable Basis: 53.37%
20-year class life property consists of specialized farm buildings and agricultural structures as defined by IRS guidelines, forming the largest component of this study.
- General purpose farm buildings and specialized agricultural structures.
- Infrastructure dedicated to long-term agricultural production.
39-Year Class Life
Total Depreciation Allocation: $181,528.69 Percentage of Total Depreciable Basis: 5.08%
39-year class life property includes structural components of the main buildings classified as § 1250 property.
- Main building structures and long-term real property components.
- Permanent structural elements not qualifying for accelerated recovery.
Class Life Details:
Summary
The cost segregation analysis for the farm property in Talent, Oregon, identified assets eligible for shorter recovery periods and documented their allocation across 5-year, 7-year, 15-year, 20-year, and 39-year categories. This engineering-based approach aligns the property’s components with appropriate MACRS class lives and provides the taxpayer with supportable depreciation schedules.
The total increase in accumulated depreciation from this study is generated by reclassifying a substantial portion of the depreciable basis nearly 95%, into accelerated recovery periods.
This result improves near-term tax efficiency and supports capital planning and reinvestment decisions. Engineered Tax Services provides audit-ready documentation consistent with IRS guidance and accepted engineering practices.
Discover how cost segregation can maximize your tax benefits and improve cash flow. Get started today with a free consultation.
