Cost Segregation Scenarios

Cost segregation is easiest to understand through worked examples, because the concept depends on numbers: how much of a purchase price sits in land, how much in the building, and how much may be reclassified into shorter recovery periods. The scenarios in this category walk through those numbers for four property types using clearly stated assumptions.

Each scenario is a composite hypothetical. No scenario describes a real property or a real owner, and the percentages used are assumptions chosen for teaching, not typical results. The purpose is to show the reasoning: what a study does, what it does not do, how bonus depreciation fits in, and how loss limits and recapture can change the picture.

How to Use This Category

Start with the apartment lookback scenario if you already own property and wonder about missed depreciation. Read the self-storage and restaurant scenarios to see how different property types raise different questions. Read the medical office scenario if you own the building where your practice operates. For the underlying rules, the companion site on real estate investor tax topics explains depreciation in more detail, and your advisor can explain how the rules apply to you.

Remember that every dollar figure on these pages is an assumption. Before using any example as a guide, replace the assumptions with your own purchase price, land allocation, and expected use of losses.

Guides in Cost Segregation Scenarios

Educational purposes only. This page is an illustrative educational scenario, not tax, legal, or accounting advice, and it does not describe a real client or a real result. Tax laws change and outcomes depend on individual facts, so consult a qualified professional before acting. No result is guaranteed.