# Financial assumptions

Brindlewick Suites is a fictional 76-key, four-storey hotel in Hollinmere, Ohio. The illustrative purchase price is $8,800,000, including $1,500,000 allocated to land, leaving $7,300,000 of building and property basis. The example assumes an owner-operated hotel with transient stays and a 39-year nonresidential building schedule. Amounts below are illustrative deductions and allocations, not cash savings.

| Component | Illustrative basis | Schedule in this example | Assumption |
|---|---:|---|---|
| Detention basin and drains | $105,000 | 15-year | The independent detention basin, catch basins and site drainage are 15-year land improvements in this example. |
| Parking lot and striping | $355,000 | 15-year | The paving, striping, accessible stalls and porte-cochere drive lane are 15-year land improvements in this example. |
| Curbs and front walks | $75,000 | 15-year | The site curbs and the detached front sidewalks are 15-year land improvements in this example. |
| Foundations and slab | $340,000 | 39-year building | The concrete footings and slab on grade, with the building-pad grading, remain with the 39-year building in this example. |
| Ground floor rooms and halls | $720,000 | 39-year building | The ground-floor frame, corridor, stairs, windows and hard-wired through-wall room units are assumed to use the 39-year building schedule in this example. |
| Lobby and porte-cochere | $330,000 | 39-year building | The lobby shell, built-in registration counter, vestibule and attached porte-cochere canopy are part of the structure and follow the 39-year schedule in this example. |
| Breakfast area | $185,000 | 39-year building | The breakfast room's walls, floor, ceiling and built-in serving counter are classed with the hotel's primary use and remain with the 39-year building in this example. |
| Indoor pool and pool room | $480,000 | 39-year building | The pool shell, deck, enclosure and the pump and dehumidifier room sit inside the building and follow the 39-year building in this example. |
| Elevator and shaft | $165,000 | 39-year building | The hydraulic elevator, hoistway and machine space are structural components of the building and use the 39-year schedule in this example. |
| Power, panels and lighting | $370,000 | 39-year building | The service, meter bank, panels, general lighting and exit signs are assumed to use the 39-year building schedule in this example. |
| Sprinklers and fire riser | $235,000 | 39-year building | The ordinary building sprinkler network and fire riser are assumed to use the 39-year building schedule in this example. |
| Ground floor room carpet | $32,000 | 5-year | The guest-room carpet planks are held with releasable adhesive and are not permanently attached, so they are assumed to be 5-year lodging property while glued corridor carpet stays with the building in this example. |
| Ground floor room furniture | $120,000 | 5-year | The modeled ground-floor rooms' removable beds, night-tables and dressers use the 5-year lodging-furniture class in this example. |
| Front desk office furniture | $30,000 | 7-year | The front-desk and back-office desks, chairs and file cabinets use the 7-year office-furniture class in this example. |
| Guest services equipment | $110,000 | 5-year | The breakfast serving equipment, guest laundry machines and fitness machines are removable equipment assumed to use the 5-year lodging class in this example. |
| Second floor rooms and halls | $810,000 | 39-year building | The second-floor frame, corridor, stair runs, windows and hard-wired through-wall room units remain with the 39-year building in this example. |
| Second floor room carpet | $40,000 | 5-year | The second-floor guest-room carpet planks are held with releasable adhesive and are assumed to be 5-year lodging property in this example. |
| Second floor room furniture | $150,000 | 5-year | The modeled second-floor rooms' removable beds, night-tables and dressers use the 5-year lodging-furniture class in this example. |
| Third floor rooms and halls | $810,000 | 39-year building | The third-floor frame, corridor, stair runs, windows and hard-wired through-wall room units remain with the 39-year building in this example. |
| Third floor room carpet | $40,000 | 5-year | The third-floor guest-room carpet planks are held with releasable adhesive and are assumed to be 5-year lodging property in this example. |
| Third floor room furniture | $150,000 | 5-year | The modeled third-floor rooms' removable beds, night-tables and dressers use the 5-year lodging-furniture class in this example. |
| Fourth floor rooms and halls | $810,000 | 39-year building | The fourth-floor frame, corridor, stair runs, windows and hard-wired through-wall room units remain with the 39-year building in this example. |
| Fourth floor room carpet | $40,000 | 5-year | The fourth-floor guest-room carpet planks are held with releasable adhesive and are assumed to be 5-year lodging property in this example. |
| Fourth floor room furniture | $150,000 | 5-year | The modeled fourth-floor rooms' removable beds, night-tables and dressers use the 5-year lodging-furniture class in this example. |
| Parking light poles | $60,000 | 15-year | The independent parking-lot light poles and their concrete footings are 15-year land improvements in this example. |
| Landscape islands and beds | $85,000 | 15-year | The planted islands, beds, trees and irrigation are 15-year land improvements in this example. |
| Pylon sign structure | $40,000 | 15-year | The pylon's poles, footings and cabinet are 15-year land improvements in this example. |
| Pylon sign faces | $18,000 | 5-year | The lit faces and dedicated wiring on the pylon are assumed to be 5-year lodging property in this example. |
| Roof and rooftop air units | $445,000 | 39-year building | The roof trusses, shingles and membrane, parapet caps, drains and rooftop air units are assumed to use the 39-year building schedule in this example. |

## Classification notes

This example applies conservative classifications based on the IRS Cost Segregation Audit Techniques Guide. Permanent structure, hard-wired building systems, interior pool construction and roof equipment remain in the 39-year building rows. The example treats guest-room carpet planks held with releasable adhesive as 5-year lodging property; glued-down carpet in corridors, stairs and lobby stays in building rows. The through-wall PTAC units are assumed to serve the building structure and remain in the 39-year floor rows. Removable beds, night-tables and dressers are 5-year lodging property. Front-desk and back-office desks, chairs and file cabinets are a separate 7-year office-furniture row.

The indoor pool and its pump and dehumidifier room remain with the building. Removable breakfast, laundry and fitness equipment is included in guest services equipment. The pylon structure and site work are 15-year land improvements; sign faces are a separate 5-year row. Building-pad grading remains with the foundation. The hotel-row classifications follow the ATG casino and gaming directive as an illustrative reference; whether those classifications transfer to a limited-service hotel requires engineering review.

A cost segregation study may support a different allocation after review of the property facts. If a study reclassified an amount, year-one deductions would change under the applicable schedules and conventions.

## Sources

- IRS Publication 946, How To Depreciate Property: https://www.irs.gov/publications/p946
- IRS Cost Segregation Audit Techniques Guide: https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide

All figures and classifications are illustrative assumptions for this fictional property.