CASE STUDY

Strip Mall

Oakwood Village, OH

Highlights

In 2022, a savvy investor purchased a strip mall with a building cost basis of $2,945,000 as part of their growing commercial real estate portfolio. This investor was laser-focused on tenant-level asset detail—seeking the ability to write off tenant improvements immediately if a tenant vacated.

Instead of settling for the traditional straight-line method—which would have yielded just $75,513 in first-year depreciation—the investor partnered with Cost Seg America. Our team applied IRS Approach #2—the Detailed Engineering Cost Estimate Approach— unlocking significantly more in accelerated deductions right from the start.

The result? $971,054 of the building’s value was moved into shorter-life asset categories, giving the investor over 12 times more in first-year deductions than straight-line depreciation. Each tenant space was carefully broken out, so if a tenant ever leaves, the investor can write off those improvements right away—saving even more on taxes.

Statistics

$2,945,000

Cost Basis

$75,513

First-Year Depreciation (Straight-Line)

$971,054

First-Year Depreciation (Cost Seg + 100% Bonus Depreciation)

$919,108

Total Accelerated Depreciation Identified

31%

Depreciation Accelerated

Approach

Cost Seg America used the IRS’s Approach 2 — the Detailed Engineering Cost Estimate Approach outlined in the IRS Cost Segregation Audit Technique Guide — to accurately classify assets and maximize allowable depreciation.
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Breakdown of Reclassified Assets:

Comprehensive Data Collection – Our team gathers all relevant documents, including settlement statements, site plans, and architectural drawings, to create a complete asset profile.
On-Site Inspection – Our analysts conduct a detailed inspection to identify every critical component of the property.
Precise Asset Reclassification – Our team categorizes property components according to IRS guideline, ensuring compliance while accelerating depreciation schedules.
Optimized Depreciation Application – Our team's analysts apply MACRS to maximize tax deferrals and enhance cash flow.
Seamless CPA Collaboration – Our cost segregation report is delivered audit-ready, ensuring smooth integration into tax filings with full IRS defense.
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With Cost Seg America, tax strategy is not just about compliance—it is about unlocking capital and fueling growth.

💡 How This Property Was Reclassified
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🟦 39-Year Property: $2,025,892

🟩 15-Year Property: $688,108

🟨 7-Year Property: $2,063

🟥 5-Year Property: $228,937

Breakdown of Reclassified Assets

39-Year Property (Structural Building Components)

Concrete slab and structural framing, exterior block walls and stucco façade, flat roof with basic membrane or tar & gravel system, stairwells (if any), standard electrical panels, plumbing rough-ins, and HVAC ductwork

15-Year Property (Land Improvements)

Worn asphalt parking lot and drive lanes, concrete curbs and simple sidewalks, ADA-compliant ramps near storefronts, basic parking lot lighting on steel poles, minimal landscaping with grass or mulch beds, standard irrigation timers and PVC piping

7-Year Property (Specialty Equipment)

Basic telephone/data wiring for small offices, wall-mounted cable panels, low-voltage connections installed by tenants (like nail salons or insurance agencies)

5-Year Property (Short-Life Assets)

Fluorescent light fixtures, vinyl base cabinets or laminate counters in back offices or small retail, wall-mounted HVAC controls or tenant-installed thermostats, wired security alarms or keypad entries, tenant signage inside glass entryways, off-the-shelf shelving or display racks

Summary

By partnering with Cost Seg America, this strip mall investor unlocked $971,054 in first-year depreciation—more than 12 times what straight-line depreciation would have delivered. Over 31% of the property’s value was accelerated into short-life asset classes, providing powerful tax deferral and a major cash flow advantage right out of the gate.

But what truly sets this study apart? We went beyond the standard approach—breaking out each tenant space individually. That means when a tenant moves out, this investor can immediately write off any remaining improvements tied to that space. It is the kind of flexibility and foresight that only comes with a Detailed Engineering Study done the right way.

At Cost Seg America, we are here to help you protect what you have purchased, maximize what is possible, and move forward with confidence.

Complimentary Proposal