# Alderwell Dental, Level Four: financial assumptions

This is a fictional acquisition of an existing owner-occupied office condominium for $2,400,000, including $140,000 nondepreciable land. It is not a lease, construction budget, appraisal or completed engineering study.
Ownership is a provisional scenario chosen for this example. A leasehold build-out requires its own facts and a new financial schedule.
The property is acquired May 1, 2026 and placed in service May 15, 2026, with 100% business use in a calendar tax year.
The practice occupies floor four of fictional six-story Velloran Exchange. Its approximately 6,000-square-foot gross floor plate includes the common arrival core. Eight operatories, reception, imaging, sterilization, staff space and restrooms are modeled.
An illustrative one-sixth undivided interest in specified common elements is assumed. The $140,000 land, $35,000 paving, $10,000 detached walks, $100,000 lift/stair/lobby and $50,000 roof amounts are already the purchased share, not the value of the entire common asset.
Whole common-asset reference amounts would be $840,000 land, $210,000 paving, $60,000 walks, $600,000 lift/stair/lobby and $300,000 roof under that illustrative share. These are allocation assumptions, not independent valuations. They are not added to the acquisition price.
Offices on floors one through three and five through six, plus neighboring buildings, are context only. Their tenant interiors are not part of this acquisition. The suite-envelope row includes the allocated structural interest; the slab row includes the floor and attributable structural support. No other-floor office cost is added separately.
Dental chairs, imaging machines, sterilizers, computers, loose furnishings and staff appliances are separately purchased staging, excluded from the acquisition and all financial rows.
Removable dental-specific casework and documented equipment-only branches retain the $380,000 five-year basis of the single-story Alderwell Dental example. General distribution, shielding, permanent floor finishes, comfort HVAC, reception millwork and staff cabinets remain building property.
This existing-property acquisition does not assume buyer-made qualified improvement property. Permanent interior improvements are not moved to 15 years merely because the practice occupies an upper-floor office.
Short-life basis totals $425,000, or 18.8% of depreciable basis. This is below the 31.5% short-life share of the single-story Alderwell Dental example because substantial suite and common structural value remains with the building. No classification was increased to reach a target deduction.
Comfort HVAC basis covers the suite fan coils, ducts, controls and registers. Rooftop host plant is context and carries no separate allocation in this scenario.
The two upper host floors are nonclassified context. They lift away with the roof so the fourth-floor suite can be inspected. Their cost is not added to the roof row.
The eligible acquired short-life assets are assumed to meet the 100% bonus rules, including qualifying acquisition, unrelated-party and prior-use conditions. No ADS requirement, bonus opt-out or section 179 deduction is assumed.
The 39-year building uses straight-line depreciation with the mid-month convention and 7.5 months in 2026. Without bonus, five-year property uses 200% declining balance and fifteen-year site property uses 150% declining balance with the half-year convention.
All property enters service in May. No mid-quarter convention is assumed. No tax rates or cash benefit are modeled. Amounts are illustrative depreciation deductions, not tax savings.

## Acquisition allocation

| Component | Purchased basis | Recovery |
|---|---:|---|
| Shared parking interest | $35,000 | 15 years |
| Shared walkway interest | $10,000 | 15 years |
| Fourth-floor slab | $180,000 | 39 years |
| Suite and structural share | $800,000 | 39 years |
| Shared elevator and stairs | $100,000 | 39 years |
| Windows and entry doors | $110,000 | 39 years |
| Room walls and doors | $100,000 | 39 years |
| Building plumbing | $75,000 | 39 years |
| Building electrical | $95,000 | 39 years |
| Heating and cooling | $110,000 | 39 years |
| Dental equipment plumbing | $95,000 | 5 years |
| Dental equipment circuits | $90,000 | 5 years |
| Tile and permanent floors | $60,000 | 39 years |
| Reception counter | $45,000 | 39 years |
| Operatory cabinetry | $125,000 | 5 years |
| Sterilization cabinetry | $45,000 | 5 years |
| Imaging room shielding | $35,000 | 39 years |
| Restrooms and fixtures | $45,000 | 39 years |
| Staff room cabinetry | $30,000 | 39 years |
| Removable carpet tiles | $25,000 | 5 years |
| Shared roof interest | $50,000 | 39 years |
| Total depreciable basis | $2,260,000 | |
| Nondepreciable land interest | $140,000 | None |
| Total acquisition | $2,400,000 | |

## First-year arithmetic

Five-year basis: $380,000. Seven-year basis: $0. Fifteen-year basis: $45,000. Building basis: $1,835,000.
100% bonus: $425,000 + $1,835,000 x 7.5 / 468 = **$454,407.05**.
No bonus: $380,000 x 20% + $45,000 x 5% + $1,835,000 x 7.5 / 468 = **$107,657.05**.

## Classification judgments

The common-interest percentages and values are fictional scenario assumptions. A real condominium study needs the deed, declaration, acquisition allocation, land valuation and common-element ownership records. They may not match floor-area percentages. Public streets, street trees and neighboring buildings carry no depreciable allocation here.
Only removable procedure-specific casework and equipment-serving branches use five years. The equipment-use facts and allocation method must support this treatment; the ATG is an examination guide, not an approval of this dental allocation. Ordinary office furniture is excluded staging, not moved from seven to five years.
Common lifts, stairs, structural members and the roof remain building property. No qualified-improvement-property treatment is assumed for this purchase of existing improvements. A later owner-made interior renovation could require a different analysis; the current rows should not be reused for that scenario without review.
The site allocations represent an assumed ownership interest in detached paving and walks. If the condominium does not convey those interests, the $45,000 must be removed from site basis and the acquisition allocation reconciled. Common HOA dues and reserves are not modeled as acquired depreciable assets.
Replacing the provisional condominium scenario with a leased suite changes the scope substantially. Land, roof, elevator and common paving cannot simply be treated as the tenant’s acquired property. A leased build-out would need actual tenant costs, ownership terms and improvement facts.

## IRS sources

- [IRS Publication 946, depreciation classes, conventions and qualified improvement property](https://www.irs.gov/publications/p946)
- [IRS Publication 551, allocation of lump-sum acquisition basis](https://www.irs.gov/publications/p551)
- [IRS Notice 2026-11, additional first-year depreciation](https://www.irs.gov/pub/irs-drop/n-26-11.pdf)
- [IRS Cost Segregation Audit Techniques Guide, functional analysis and supported allocation](https://www.irs.gov/pub/irs-pdf/p5653.pdf)