Data Wise - Cost Segregation Case Study: Unlocking $11M in Bonus Depreciation on a $38.5M Luxury Multifamily Acquisition
- Bob Montes
- May 18
- 2 min read
Overview
In January 2022, a real estate investment group acquired a 100-unit upscale apartment complex in Nevada for $38,500,000. The property spans 135,200 square feet on a 2.95-acre site, offering a modern living experience with high-end features such as:
Resort-style pool with cabanas and firepit
Spa, BBQ area, clubhouse, and recreation deck
Fitness center and a dog park
Units range from 1-bed/1-bath to 3-bed/2.5-bath, targeting a broad tenant base. To maximize their investment’s after-tax cash flow, the ownership group partnered with Data Wise to perform a cost segregation study for the 2022 tax year.
Objective: Maximize First-Year Depreciation Using 100% Bonus
With 100% bonus depreciation available in 2022, the timing was ideal for this strategy. Cost segregation allowed the owners to reclassify significant portions of the property into shorter-lived asset categories—5, 7, and 15-year property—accelerating deductions and reducing near-term tax liability.
Cost Segregation Analysis: Key Results
Metric | Result |
|---|---|
Total Cost Basis Analyzed | $32,200,000 |
Building Square Footage | 135,200 SF |
Total Units | 100 |
Total Depreciation Identified | $11,000,000 |
% of Property Reclassified | 34% |
First-Year Depreciation Deduction | $11,400,000 |
First-Year Cash Flow Impact | $4,300,000 |
Bonus Depreciation Applied | 100% |
Data Wise's Scope of Work
As the cost segregation provider on this project, Data Wise delivered a full suite of professional services designed to ensure maximum tax benefit and full IRS audit readiness. Our scope included:
Site Inspection
Review and use of existing construction plans and photo/video documentation
Engineered Cost Segregation Study – Acquisition Basis
Audit-Ready Final Cost Segregation Report
About Our Study & Report
At Data Wise, our final cost segregation reports are engineered to meet the highest professional standards:
Fully Auditable Reports: All reports are audit-ready and may be shared with internal stakeholders, CPAs, or external reporting agencies as needed.
IRS Compliance: Every analysis and report is prepared in strict accordance with IRS guidelines, ensuring defensibility and integrity.
Documentation Retention: We maintain comprehensive workpapers, including client-provided materials and all supporting documentation developed by our team.
Audit Support: In the event of an audit, Data Wise is equipped to provide the full analytical trail that supports our tax positions, helping to defend our findings and your deductions.
What Drove the Accelerated Depreciation
5-Year Personal Property:
Appliances, luxury flooring, designer lighting, cabinetry, window treatments, and select clubhouse furnishings.
15-Year Land Improvements:
Site landscaping, irrigation, hardscape, pool and spa features, outdoor lighting, BBQ and firepit areas, and the dog park.
Strategic Outcome: A Strong First-Year ROI
This study delivered more than just paper savings:
$11.4 million in first-year depreciation deductions
$4.3 million in immediate cash flow impact
34% of the cost basis reclassified into shorter-lived assets
This significantly enhanced the investment's return profile while creating substantial tax sheltering opportunities.
Conclusion: Turning Depreciation into Dollars
This Nevada multifamily acquisition illustrates the power of pairing a cost segregation study with bonus depreciation—especially when executed by a dedicated engineering team.
With Data Wise’s audit-ready methodology, the ownership group unlocked:
Significant front-loaded depreciation
Enhanced year-one cash flow
Long-term tax efficiency
Thinking about a new acquisition?
Let’s talk about how Data Wise can help you maximize value through engineered cost segregation.