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Faster depreciation: Foothill rentals (4 unsold specs kept as rentals)

S corporation · UT · tax year 2026 · Lehi, UT · contact Jared Holm, CFO

Conservative Moderate Aggressive

Asset schedule CSV (moderate)

Fit screen · is the study worth buying?

Worth it$4,958

Worth it: conservative net benefit $4,958 after the $2,095 fee and exit tax.

Moderate case: $4,958 NPV after the fee and the extra tax at a sale in 2033 (7-year hold).

rental losses are passive (the passive loss rules): usable only against passive income; suspended losses release on full disposition. the passive loss rules(i) $25,000 allowance not modeled
only $21,391 of the $169,640 extra year-1 deduction is usable now; the rest is suspended or carried forward
exit tax at a 7-year sale is $53,709 higher with the study (recapture)
long-term capital gain rate 20% is a PLACEHOLDER: enter the builder's rate

building cost

$1.48M

Land (not depreciable)

$520k

Reclassified, moderate

$175k

Building class

27.5-yr

Year-1 deduction with study

$212k

Without study

$43k

Placed in service Mar 1, 2026 · IRS audit guide table: residential rental · state UT: conforms

Reclassification summary

Moderate scenario

Asset class	Life	Basis	Share
5-year personal property (asset class 57.0)	5 yr	$80,760	5.5%
15-year land improvements	15 yr	$93,908	6.3%
27.5-year residential rental property	27.5 yr	$1,305,332	88.2%
Building cost		$1,480,000	100%

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

LVP flooring main level · $18,781
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	$212,249	$42,609	$21,391	$8,888
2027	$47,462	$53,813	$10,187	$4,233
2028	$47,462	$53,813	$10,187	$4,233
2029	$47,462	$53,813	$10,187	$4,233
2030	$47,462	$53,813	$10,187	$4,233
2031	$47,462	$53,813	$10,187	$4,233
2032	$47,462	$53,813	$10,187	$4,233
2033	$47,462	$53,813	$10,187	$4,233
Lifetime	$1,480,000	$1,480,000	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)	$80,760	$65,594	$69,477	$69,276	−$201
2028 (2 yrs)	$80,760	$119,317	$66,849	$66,637	−$212
2029 (3 yrs)	$80,760	$173,039	$64,221	$63,998	−$223
2030 (4 yrs)	$80,760	$226,762	$61,593	$61,359	−$234
2031 (5 yrs)	$80,760	$280,484	$58,965	$58,721	−$245
2032 (6 yrs)	$80,760	$334,206	$56,337	$56,082	−$256
2033 (7 yrs)	$80,760	$387,929	$53,709	$53,443	−$267
2034 (8 yrs)	$80,760	$441,651	$51,081	$50,804	−$277
2035 (9 yrs)	$80,760	$495,380	$48,453	$48,165	−$288
2036 (10 yrs)	$80,760	$549,109	$45,825	$45,526	−$299

· 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
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
no interviews logged
missing
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: 2025 TC-20 Sch. B line 8: 'Utah laws generally follow the Internal Revenue Code for depreciation, amortization and basis'; basis differences only in limited instances (338 elections pre-1994, consolidated rules). No depreciation addback in 59-7-105 or 59-10-114 per earlier statute read
· 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
· spec home converted to rental: placed in service at conversion; holding as inventory is not a prior use, so bonus can apply (Reg. 1.bonus depreciation-2(b)(3)(ii)(B)(2), library); bonus date is the construction start

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 ($1.48M). The CSV uses the moderate scenario shown here.