Cost segregation case study · Lookback
The Biscayne Bay Compound
55 La Gorce Circle, Miami Beach, FL 33141 · placed in service May 15, 2023
Why this study reads the way it does
Two years late to cost segregation: the catch-up comes home at once
The owner, a physician on 1099 income who materially participates, bought and renovated this Miami Beach vacation rental in 2023, then depreciated the whole basis on the slow 39-year straight line ever since. A lookback study in 2025 recomputes it the way it should have read from day one and books the difference now, with no amended returns.
The missed acceleration books in one year
§481(a) catch-up via Form 3115 · year-one $1,071,309
A change in accounting method lets the engine take the entire shortfall (every dollar of 5-, 15-year and bonus depreciation that should have run 2023–2024 but didn’t) as a $989,538 §481(a) catch-up in the current year. With 2025’s own depreciation on top, that’s a $1,071,309 year-one deduction against just under two years of straight-line already claimed.
The 2023 rate travels with the property
80% bonus locked at placed-in-service
Bonus depreciation is fixed at the year a property enters service. This one’s 2023, so the catch-up applies the 80% phase-down rate (not 2025’s 40%) on the reclassified short-life basis. Waiting to run the study didn’t cost the owner the rate.
The lesson. You don’t lose accelerated depreciation by not claiming it on time. A lookback cost segregation recaptures it through Form 3115 in a single year, at the bonus rate the property earned when it was placed in service.
Where the cash went
$3.72M in, split into land, building, and remodel
The property was bought for $3,100,000 and remodeled for $620,000, $3,720,000 in all. Land never depreciates, so it's carved out first; everything else becomes depreciable basis the study then accelerates.
Where the $3.72M went
Every dollar in, by where it landed. Land never depreciates; building plus remodel is what the study accelerates.
Land (never depreciates)$775,000 · 21%
Building basis (from purchase)$2,325,000 · 63%
Remodel (capitalized)$620,000 · 17%
Building $2,325,000 + remodel $620,000 = $2,945,000 depreciable basis.
Inside the study
What the engine found
The deterministic engine separated the $2,945,000 depreciable basis into IRS recovery classes, then the engineered review confirmed every component against the source documents.
ULV-2025-41AC
Engineered review passed · 24 components, 2 sources
Depreciable basis$2.94M
Short-life reclass$1.18M · 40%
Year-one deduction$1.07M
Component allocation
$2,945,000 depreciable basis across MACRS recovery classes.
5-year personal property$768,429 · 26%
15-year land improvements$415,183 · 14%
39-year building shell$1,761,388 · 60%
Residential rental building $1.45MCarpet and flooring (non-pe… $90KWindow treatments $90KCabinetry (non-permanent) $90KAppliances $90KDecorative lighting $90KLinens and decor (non-perma… $90KCustom cabinetry: kitchen, … $90K
Year one, in dollars
Two deductions stack in the first year.
| Current-year depreciation | $81,771 |
| §481(a) catch-up (Form 3115) | $989,538 |
| Total year-one deduction | $1,071,309 |
| Straight-line without a study | ~$75,513/yr |
About 14× more deduction pulled into year one than straight-line.
Depreciation by year
Year-one spike from bonus depreciation, then the building shell.
| Year 1 | $1,071,309 |
| Year 2 | $69,262 |
| Year 3 | $68,623 |
| Year 4 | $59,189 |
| Year 5 | $50,063 |
| Year 6 | $50,063 |
| Year 7 | $50,071 |
| Year 8 | $50,063 |
| Year 9 | $50,071 |
| Year 10 | $50,063 |
| Year 11 | $50,071 |
| Year 12 | $50,063 |
| Year 13 | $50,071 |
| Year 14 | $47,613 |
| Year 15 | $45,164 |
| Year 16 | $45,164 |
| Year 17 | $45,164 |
| Year 18 | $45,164 |
| Year 19 | $45,164 |
| Year 20 | $45,164 |
| Year 21 | $45,164 |
| Year 22 | $45,164 |
| Year 23 | $45,164 |
| Year 24 | $45,164 |
| Year 25 | $45,164 |
| Year 26 | $45,164 |
| Year 27 | $45,164 |
| Year 28 | $45,164 |
| Year 29 | $45,164 |
| Year 30 | $45,164 |
| Year 31 | $45,164 |
| Year 32 | $45,164 |
| Year 33 | $45,164 |
| Year 34 | $45,164 |
| Year 35 | $45,164 |
| Year 36 | $45,164 |
| Year 37 | $45,164 |
| Year 38 | $16,936 |
Method. Allocations follow the IRS Cost Segregation Audit Techniques Guide, Rev. Proc. 87-56, and MACRS (Pub. 946), with the 80% bonus rate (placed in service 2025) applied to qualifying 5- and 15-year property. The engine produces the figures deterministically; AI is used only to sort and extract from uploaded documents. Every line cleared the engineered review.
State tax treatment
What each state does with this deduction
Each state this study touches, classified by how it treats the federal year-one deduction.
Florida (FL)No state income tax
No individual income tax; the federal deduction is the whole story for Florida.
Run on Unlevered · engineered review · ULV-2025-41AC
