Faster depreciation: Cypress Bend BTR (60 homes)

Partnership · TX · tax year 2026 · Austin, TX · contact Ana Villarreal, Controller

Conservative Moderate Aggressive

Asset schedule CSV (moderate)

Fit screen · is the study worth buying?

Worth it$266,886

Worth it: conservative net benefit $266,886 after the $4,950 fee and exit tax.

Moderate case: $266,886 NPV after the fee and the extra tax at a sale in 2036 (10-year hold).

real estate professional with material participation (real estate professional rules): rental losses nonpassive
property NOI not given: 0 assumed
the excess business loss limit threshold for 2027-2036 carried forward from an earlier year (UNVERIFIED)
only $1,101,265 of the $2,033,402 extra year-1 deduction is usable now; the rest is suspended or carried forward
exit tax at a 10-year sale is $489,529 higher with the study (recapture)
long-term capital gain rate 20% is a PLACEHOLDER: enter the builder's rate

building cost

$17.7M

Land (not depreciable)

$3.60M

Reclassified, moderate

$2.09M

Building class

27.5-yr

Year-1 deduction with study

$2.54M

Without study

$511k

Placed in service Mar 15, 2026 · IRS audit guide table: residential rental · state TX: cpa review

Reclassification summary

Moderate scenario

Asset class	Life	Basis	Share
5-year personal property (asset class 57.0)	5 yr	$968,045	5.5%
15-year land improvements	15 yr	$1,125,634	6.3%
27.5-year residential rental property	27.5 yr	$15,646,321	88.2%
Building cost		$17,740,000	100%

1 line(s) need a classification decision (they stay in the building class until resolved)

LVP flooring main level · $225,127
Luxury vinyl plank: readily removable (5-year) vs permanently affixed (building) depends on installation method (IRS audit guide Floor Coverings rows)
Candidates: floor_carpet_vinyl (5-year property), floor_permanent (27.5-year building)

With vs without the study

deductions by tax year; difference after passive-loss limits where they apply

Tax year	With study	Without study	Usable difference	Cash tax saved
2026	$2,544,137	$510,735	$2,033,402	$752,359
2027	$568,900	$645,026	−$76,126	−$28,167
2028	$568,900	$645,026	−$76,126	−$28,167
2029	$568,900	$645,026	−$76,126	−$28,167
2030	$568,900	$645,026	−$76,126	−$28,167
2031	$568,900	$645,026	−$76,126	−$28,167
2032	$568,900	$645,026	−$76,126	−$28,167
2033	$568,900	$645,026	−$76,126	−$28,167
Lifetime	$17,740,000	$17,740,000	Same total over the life: the study moves deductions earlier.

Catching up on past years

Not a look-back: the property is placed in service in 2026, so the study goes on the original return. No catch-up filing is needed.

Recapture at exit

if sold in each year; 1031 exchange defers it

Sale year	Taxed as ordinary income	Taxed at up to 25%	Extra exit tax	Tax saved to date	Net after exit
2027 (1 yr)	$968,045	$786,239	$741,864	$739,449	−$2,415
2028 (2 yrs)	$968,045	$1,430,188	$713,828	$711,282	−$2,545
2029 (3 yrs)	$968,045	$2,074,131	$685,791	$683,116	−$2,675
2030 (4 yrs)	$968,045	$2,718,073	$657,754	$654,949	−$2,805
2031 (5 yrs)	$968,045	$3,362,016	$629,718	$626,782	−$2,935
2032 (6 yrs)	$968,045	$4,005,958	$601,681	$598,616	−$3,065
2033 (7 yrs)	$968,045	$4,649,901	$573,645	$570,449	−$3,196
2034 (8 yrs)	$968,045	$5,293,843	$545,608	$542,282	−$3,326
2035 (9 yrs)	$968,045	$5,937,858	$517,569	$514,112	−$3,457
2036 (10 yrs)	$968,045	$6,581,885	$489,529	$485,941	−$3,588
2037 (11 yrs)	$968,045	$7,225,899	$461,490	$457,771	−$3,719
2038 (12 yrs)	$968,045	$7,869,926	$433,451	$429,600	−$3,851

· sale price not given: building cost + land used (gain = depreciation taken)
· sale month 6; improvements price allocated pro rata by original cost (cs.sale_allocation)
· land gain is the same with or without the study and is excluded
· 1031 exchange: gain and recapture are deferred into the replacement property; personal property recapture can still arise if the replacement has less personal property property (personal property(b)(4)); CPA review
· corporate 291 and dealer property not modeled

Audit binder manifest

Job cost ledger / general ledger
total cost and reconciliation (IRS audit guide element 10)
provided
Contracts, subcontracts and change orders
direct cost support
missing
AIA G702/G703 pay applications
reconcile to contractor cost
missing
Invoices for owner-furnished equipment (appliances, FF&E)
separately acquired personal property property, no double counting
missing
Drawings and specifications (as-built)
take-offs (IRS audit guide element 8)
missing
Photographs / site visit record
site inspection (IRS audit guide ch.5 step 6)
provided
Land evidence (appraisal, closing statement, land ledger)
land allocation (IRS audit guide ch.5 step 12b)
provided
Purchase agreement and closing statement
basis and 1060 allocation check (Peco Foods)
not applicable
Cost guide citations for RCNLD
IRS audit guide ch.3.C.2 sources referenced by volume/page
not applicable
Placed-in-service evidence (certificate of occupancy, first lease)
placed-in-service date
missing
Construction start / binding contract evidence
bonus acquisition date (Notice 2026-11 sec. 3.03)
missing
Engagement letter and fee arrangement
fee arrangement (IRS audit guide ch.5 step 4)
missing
Study data: classification of every piece with IRS audit guide row and rule
schedule of assets
generated
Asset schedule CSV with sum check
fixed asset import
generated
Matrix crosswalk (component -> IRS audit guide row -> class)
examiners check consistency with the matrix
generated
Reconciliation workpaper
allocated total = building cost
generated
With / without study schedules
deduction timing
generated
Exit-year recapture table
recapture planning
generated
Fit screen
net benefit after fee and exit tax
generated
one-time catch-up adjustment workpaper and the tax form data sheet
look-back method change
not applicable
Partial asset disposition computations
PAD loss support
not applicable
Needs-review list (gray areas, AI suggestions labeled, resolutions)
open items before signing
generated

IRS audit guide quality checklist

1. Preparation by an individual with expertise and experience
Sample engineer (demo): PE, CCSP
met
2. Detailed description of the methodology
Detailed engineering approach from actual cost records (IRS audit guide ch.3.C.1)
met
3. Use of appropriate documentation
0 documents listed; every piece has a source pointer
missing
4. Interviews conducted with appropriate parties
construction manager; controller
met
5. Use of a common nomenclature
components named by IRS audit guide matrix rows (atg_row column)
met
6. Use of a standard numbering system
builder cost codes carried on every line
met
7. Explanation of the legal analysis
each piece cites a rule id with its authority (IRS audit guide matrix row, Reg. 1.48-1(e), 168(e))
met
8. Determination of unit costs and engineering take-off
no component inventory: actual line costs used without take-off
partial
9. Organization of assets into lists or groups
pieces grouped by recovery class and personal property/building property (classTotals)
met
10. Reconciliation of total allocated costs to total actual costs
reconciled: allocated total equals building cost
met
11. Explanation of the treatment of indirect costs
3 indirect lines allocated pro rata by direct cost or specifically
met
12. Identification and listing of personal property property
6 personal property pieces listed
met
13. Consideration of related aspects (inventory cost rules, method change, sampling)
inventory cost rules of indirects and interest must be confirmed by the CPA; no method change; 1 items need review
partial

Notes for the CPA

· state rule: Effective with the 2026 franchise tax report Texas applies current IRC for depreciation calculations, allowing OBBBA first-year write-off
· state conformity: CPA review
· 80% dwelling-unit rent test assumed met (no rent split given)
· 1 item(s) need review; they stay in the building class until resolved by a coded rule

Research tool for CPA review; not tax advice. AI suggestions are labeled and never change a number. cost segregation study data (CPA review). CSV: 28 rows; cost column ties to basis: yes ($17.7M). The CSV uses the moderate scenario shown here.