Cost segregation


Source Advisors


Multi Tenant Office Building


The subject property is a two building, 80,000 square foot complex with a small cafeteria for the tenants. The property was acquired for $6,700,000, placed-in-service in 2019 and sits on a 6 acre site.

As with many office buildings, the site is improved with ample parking, a monument sign and attractive landscaping.

The buildings are four-story, steel frame structures, with a glass curtain wall and built up membrane roofs. Interior finishes such as carpeting, vinyl flooring, painted drywall are commercial grade and the electrical, plumbing, HVAC and millwork are custom to each tenant’s needs


The Source Advisors Cost Segregation engineers were engaged to analyze the acquisition cost. They then applied a cost model to allocate the purchase price to various trades and building components. They conducted a thorough inspection of the property where estimates were performed.

Key property personnel were also interviewed. A detailed report was delivered, identifying and documenting all of the components that qualify for a shorter tax life.


Source Advisors reclassified 10% or $670,000 as 15-year land improvements and 15% or $1,000,005 as 5-year tangible personal property. This is about average for a Class A office building with mix of professional service tenants


Percent of reclassified property
Increased Depreciation in 1st year $1,653,527
Increased Depreciation in years 1-5 $1,481,739
Increased Cash Flow in 1st year $578,734
Increased Cash Flow in years 1-5 $518,000
Net Present Value over 39 years $354,799

*Assuming a 35% tax rate, 6% discount rate, 100% Bonus Depreciation and the property will be held for 39 years