Overview
An 8,000 SF standalone casual dining restaurant in Denver. Full-service operation with bar, distinctive architecture, outdoor patio. 2015 construction. Acquired for $2,800,000 in 2024.
The Cost Seg Smart engineered analysis identifies $668,264 in accelerated bucket components (30.6% of the $2,187,360 depreciable basis after a 21.9% land valuation).
What the analysis identifies
The 8,000 SF property carries the component density typical for a casual dining standalone. The component inventory pulls the following share into accelerated buckets:
- commercial kitchen equipment (ranges, ovens, walk-ins, fryers, prep tables)
- exhaust hoods, makeup air units, kitchen ventilation, and dedicated kitchen HVAC zones
- bar equipment, refrigeration, ice machines, dishwasher booster heaters, specialty plumbing (grease traps, gas piping)
- decorative interior finishes — booths, banquettes, decorative lighting, specialty flooring
- the parking lot, outdoor patio infrastructure, monument signage, and site lighting
Item-level engineering documentation supports each classification — photographs of mounting details, mechanical schematics for HVAC and plumbing classifications, electrical schedules for dedicated-circuit identification.
Reclass breakdown
| Bucket | Amount | % of basis | MACRS section |
|---|---|---|---|
| 5-year personal property | $477,036 | 21.8% | Section 168(e)(3)(B); Section 1245 |
| 7-year specialty | $30,063 | 1.4% | Section 168(e)(3)(C); Section 1245 |
| 15-year land improvements | $161,165 | 7.4% | Section 168(e)(3)(E); Section 1250 |
| 39-year structural | $1,519,096 | 69.5% | Section 168(c); Section 1250 |
| Total depreciable basis | $2,187,360 | 100% |
Land value (excluded from depreciable basis): $612,640 (21.9% land allocation, Denver CO market).
Year-1 federal tax savings
Assuming 100% bonus depreciation per the One Big Beautiful Bill Act (OBBBA, 2025), the full accelerated bucket components are deductible in year 1:
- Accelerated bucket total: $668,264
- Federal tax savings at 37% top bracket: $247,258
For a passive investor, the deduction creates a passive loss offsetting passive income. For a taxpayer qualifying as a real estate professional under Section 469(c)(7), the deduction offsets active income — including business operating income from non-real-estate sources.
Methodology applied
The engine applied the following parameters:
- Era profile: 2015 build, finish density and component weights calibrated to construction-era patterns
- Geo factor: 1.02 (Denver MSA, metro calibrated)
- Component count: 42 distinct line items in the inventory
- Indirect cost multiplier: 1.25 (standard 25% indirect uplift covering soft costs, contingency)
- PPI multiplier: 1.04 (BLS construction cost index applied from build year to acquisition year)
- QC status: PASS (engineered analysis cleared all 16 quality-control checks)
The land valuation used the statistical source. Properties where the county assessor record is within reliability tolerances may produce a different land allocation; the engineered methodology applies the most defensible source available.
Audit considerations specific to this property
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Kitchen equipment vs structural plumbing: Commercial kitchen equipment is 5-year. The gas piping serving the kitchen is 5-year when dedicated to and removable with the kitchen operation. The audit traces each piping run.
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Exhaust hoods and makeup air: Kitchen exhaust hoods classify as 5-year personal property. The roof curb and structural penetration the exhaust passes through are 39-year. The split is defended by the mechanical drawings.
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Decorative vs functional lighting: Pendants over the bar are 5-year decorative. Recessed cans providing general illumination as base electrical are 39-year. The lighting plan and circuit schedule resolve the split.
Return profile
| Metric | Value |
|---|---|
| Study cost (typical) | $4500–6500 |
| Year-1 federal tax savings (37% bracket, 100% bonus) | $247,258 |
| Year-1 ROI on study fee | 38×–55× |
| Total accelerated depreciation pulled forward | $668,264 |
The ROI calculation reflects gross year-1 tax savings against the typical study cost range. Net present value of the strategy depends on hold period (longer holds capture more time value) and recapture treatment at sale.
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