$59.15M Reclassified on an 8-Property Commercial Portfolio Across Five States
One commercial investor brought USTAGI eight properties across five states: three assisted living facilities, two apartment communities, an office building, a retail property and a self storage facility. Each received its own detailed engineering study, and together they moved $59.15M of depreciable basis into shorter recovery periods.
- Properties
- 8
- Combined purchase price
- $186.55M
- Reclassified
- $59.15M
- Share of basis
- 34%
The portfolio and the result
The eight properties had a combined purchase price of $186.55M and a depreciable basis of $172.04M. The studies identified $38.47M of 5-year property and $20.68M of 15-year property, 34% of the combined basis.
Results varied by property type. The assisted living facilities and the Florida apartment community each reached 36% to 37% of basis, which typically reflects more specialized interiors, fixtures and site work. The self storage facility, a simpler structure, came in at 22%.
Seven of the properties were placed in service in 2025 or 2026 and studied in their first year. One had been in service since 2015 and was studied as a look-back, so the owner could catch up on depreciation missed in earlier years.
How the combined basis was allocated
| Category | Amount | Share of basis |
|---|---|---|
| 5-year property | $38.47M | 22% |
| 15-year property | $20.68M | 12% |
| Remaining building basis | $112.89M | 66% |
Property by property
| Property | State | Purchase price | Reclassified | Share of basis |
|---|---|---|---|---|
| Apartment community | Florida | $32.5M | $10.68M | 37% |
| Office building | California | $30.57M | $7.15M | 29% |
| Assisted living facility | California | $29.44M | $10.84M | 37% |
| Assisted living facility | Washington | $28.01M | $10.02M | 36% |
| Retail property | Pennsylvania | $26.63M | $9.62M | 36% |
| Apartment community | California | $21M | $5.4M | 29% |
| Assisted living facility | Arizona | $15.4M | $5.12M | 37% |
| Self storage facility | California | $3M | $332K | 22% |
How the studies were done
- Study type
- Detailed engineering study on each property
- Property types
- Assisted living, apartments, office, retail and self storage
- States
- Arizona, California, Florida, Pennsylvania and Washington
- Tax years
- 2025 for six properties, 2026 for two
- Placed in service
- Seven in 2025 or 2026; one in 2015, studied as a look-back
- Client
- One commercial real estate investor
Questions about this case study
Each building has its own components, site work and placed-in-service date, and each is depreciated separately on the return. A separate study per property documents the allocation for that asset, which is what supports it if a single property is ever examined.
Assisted living facilities carry more specialized finishes, plumbing and electrical serving equipment, and site improvements than a typical office building. Those items tend to qualify as 5 or 15-year property, so a larger share of the basis moves off the 39-year schedule.
Yes. One property in this portfolio had been in service since 2015. A look-back study lets the owner claim the depreciation missed in earlier years as a single adjustment in the current year, generally through a change in accounting method on IRS Form 3115, without amending past returns.
No. $59.15M is the depreciable basis the studies moved into 5 and 15-year property. The tax effect depends on the owner's tax rate, bonus depreciation eligibility for each property and their overall tax situation, which their CPA determines.
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Results shown are from completed USTAGI cost segregation studies and are not a guarantee of future results. The client is not named, locations are shown by state and amounts are rounded. “Reclassified” is the depreciable basis the studies moved into 5, 7 and 15-year property; it is not a tax-savings figure. Outcomes depend on each property and each owner’s tax situation. Consult your tax advisor about your situation.