Worked example: an $11.8 million distribution center

The property

A 212,000 square foot cross-dock distribution facility built 2023, tilt-wall construction, 34 dock doors, four acres of heavy-duty concrete truck court, separate auto parking, fully fenced and gated. Total project cost $14,200,000 with land at $2,400,000, leaving $11,800,000 of depreciable basis.

Owner-user: a regional logistics company operating from the building, so the deduction offsets active business income and the passive rules are not in play.

Without a study

$11,800,000 over 39 years: about $252,000 in a full year.

The reclassification

5 and 7-year property — $680,000. Dedicated power distribution and bus duct serving material-handling equipment, battery charging stations, compressed air distribution, dock levelers, seals, shelters and restraints, high-bay task lighting tied to work functions, office-area carpet, finishes, cabinetry and data cabling, security and access control, yard camera systems and gate operators.

15-year land improvements — $1,980,000. Heavy-duty concrete truck court and trailer storage, asphalt auto parking and drive aisles, entry aprons, perimeter fencing, slide gates and guard booth, high-mast yard lighting and site electrical, transformer pads, storm water systems and detention, landscaping, berms and irrigation.

39-year property — $9,140,000. Tilt-wall shell, structural frame, roof, warehouse floor slab, foundations, fire protection mains and riser, building HVAC and general electrical service.

Total reclassified: $2,660,000, or 22.5% of basis — modest as a percentage, large as a number.

With 100% bonus

First-year deduction approximately $2,890,000 against $252,000 without a study. At a 35% combined rate, roughly $920,000 of tax deferred.

Why it worked despite the low percentage

Because the property is large and the site is enormous. The truck court alone carried more basis than the entire 5-year category. On industrial property the yard is the study.

Direct takeoff

Because the building was constructed in 2023 and the owner retained the general contractor's schedule of values, pay applications and change order log, components were costed directly from actual records rather than estimated. That produced a more precise result, a stronger report and a lower fee than an equivalent study on a property with no records.

Fee: $11,200, against a first-year benefit of roughly $920,000.