Cost segregation case study · Lookback
The Willow Bend Condo
Purchase price
$790K
Depreciable basis
$537K
Year-one deduction
$271K
Why this study reads the way it does
A condo is not a reason to skip cost segregation
This Austin unit is a condominium— the kind of property owners assume cost segregation can't touch, because "you don't own the land" or "it's all common elements." The deed says otherwise: the unit carries a 65% undivided interestin the regime's common elements, including the land. The study documents that interest instead of guessing around it, and books five never-depreciated years in one filing.
The land allocation comes from the regime documents
Land $252,800 (32%) · depreciable basis $537,200 of $790,000
Condo ownership does not make the land allocation zero — and it does not make the whole purchase depreciable either. The county's allocation for this unit reflects the documented 65% common-element interest, so $252,800 of the $790,000 purchase is excluded as land and the study runs on a defensible $537,200 basis. The report states the clause in plain language on page one.
The owner's own floor plan drives the room map
13 measured rooms · every photo assigned · dollars exact-sum to the basis
The uploaded floor plan's printed dimensions become 13 measured rooms, every listing photo is matched to one, and the allocation workpaper assigns each dollar of basis to a room or the site — components that belong to a room type land there (plumbing in the baths and kitchen, never a bedroom), and the room totals sum to the $537,200 basis to the cent.
Five sidelined years land at once
§481(a) catch-up $223,036 via Form 3115 · deductible this year $270,559
The unit has run as a short-term rental since 2021 with no depreciation claimed. The lookback recomputes it as it should have read from day one and books the shortfall as a single catch-up — $270,559 deductible this year, including the $38,295 furnishing pool itemized from the photos.
The lesson.Condo and townhome owners routinely leave cost segregation on the table because the ownership structure sounds disqualifying. It isn't — the regime documents state exactly what you own, and a study that reads them gets the land right and the catch-up through.
Where the cash went
$790K in, split into land and building
The property was bought for $790,000. Land never depreciates, so it's carved out first; the building basis becomes the depreciable pool the study then accelerates.
Where the $790K went
Every dollar in, by where it landed. Land never depreciates; the building basis is what the study accelerates.
$790Ktotal spend
Land (never depreciates)$252,800 · 32%
Building basis (from purchase)$537,200 · 68%
Building $537,200 = $537,200 depreciable basis.
Inside the study
What the engine found
The deterministic engine separated the $537,200 depreciable basis into IRS recovery classes, then the engineered review confirmed every component against the source documents.
Component allocation
$537,200 depreciable basis across MACRS recovery classes.
$537Kbasis
5-year personal property$134,300 · 25%
15-year land improvements$42,976 · 8%
39-year building shell$359,924 · 67%
Residential rental building $360KLinens and decor (non-perma… $52KAppliances $31KCabinetry (non-permanent) $24KFencing $20KLandscaping (depreciable) $14KCarpet and flooring (non-pe… $14KWindow treatments $10K
Year one, in dollars
Two deductions stack in the first year.
| Current-year depreciation | $9,229 |
| §481(a) catch-up (Form 3115) | $261,330 |
| Total year-one deduction | $270,559 |
| Straight-line without a study | ~$13,774/yr |
About 20× more deduction pulled into year one than straight-line.
Depreciation by year
Year-one spike from bonus depreciation, then the building shell.
| Year 1 | $232,264 |
| Year 2 | $9,229 |
| Year 3 | $9,229 |
| Year 4 | $9,229 |
| Year 5 | $9,229 |
| Year 6 | $9,229 |
| Year 7 | $9,229 |
| Year 8 | $9,229 |
| Year 9 | $9,229 |
| Year 10 | $9,229 |
| Year 11 | $9,229 |
| Year 12 | $9,229 |
| Year 13 | $9,229 |
| Year 14 | $9,229 |
| Year 15 | $9,229 |
| Year 16 | $9,229 |
| Year 17 | $9,229 |
| Year 18 | $9,229 |
| Year 19 | $9,229 |
| Year 20 | $9,229 |
| Year 21 | $9,229 |
| Year 22 | $9,229 |
| Year 23 | $9,229 |
| Year 24 | $9,229 |
| Year 25 | $9,229 |
| Year 26 | $9,229 |
| Year 27 | $9,229 |
| Year 28 | $9,229 |
| Year 29 | $9,229 |
| Year 30 | $9,229 |
| Year 31 | $9,229 |
| Year 32 | $9,229 |
| Year 33 | $9,229 |
| Year 34 | $9,229 |
| Year 35 | $385 |
Method. Allocations follow the IRS Cost Segregation Audit Techniques Guide, Rev. Proc. 87-56, and MACRS (Pub. 946), with the 100% bonus rate (placed in service 2026) 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.
Texas (TX)No state income tax
No individual income tax; the federal deduction is the whole story for Texas.
Run on Unlevered · engineered review · ULV-2026-7248