# Serein Court financial assumptions

A fictional independent 24-room courtyard motel is acquired for $4,800,000, including $1,000,000 of nondepreciable land, and placed in service June 15, 2026. The hypothetical allocation totals $3,800,000. Every guest room is used for transient lodging. The model is a teaching property, not a market valuation or engineering study.

The operator owns the building, guest furnishings and operating equipment. Goodwill, a franchise agreement, inventory and other intangibles are excluded from this real-property-and-equipment price. A real purchase needs its own allocation, including any separately acquired business assets.

## Classification assumptions

Guest-specific beds, dressers and night-tables use the service-business furniture class. Administrative desk, chairs and files retain the office-furniture class even though the property is a motel. There are no office-type desks in the guest rooms.

Permanent walls, fixed vanities and plumbing fixtures, floor structure, bathroom tile, attached access balconies and stairs stay with the building. Ordinary building power, protection alarms and permanently installed comfort HVAC are not treated as dedicated process equipment. No QIP or section 179 deduction is assumed.

The exterior in-ground pool and its permanent equipment, fence and court stand independently on land. Portable loungers and umbrellas have a separate short-life row. Removable carpet and curtains are separate from permanent floor structure and tile. No general clearing or permanent land grading is counted as a depreciable improvement.

## Allocation

| Component | Basis | Recovery period |
|---|---:|---|
| Guest parking | $170,000 | 15 years |
| Site walks and curbs | $55,000 | 15 years |
| Site drainage | $60,000 | 15 years |
| Foundations and slabs | $350,000 | 39 years |
| First-floor permanent floors | $70,000 | 39 years |
| First-floor walls and lobby | $630,000 | 39 years |
| First-floor bathrooms | $170,000 | 39 years |
| First-floor beds and storage | $90,000 | 5 years |
| First-floor carpet & drapes | $36,000 | 5 years |
| First-floor room equipment | $36,000 | 5 years |
| First-floor comfort HVAC | $100,000 | 39 years |
| First-floor power & alarms | $90,000 | 39 years |
| Lobby office furniture | $18,000 | 7 years |
| Attached stairs & balconies | $190,000 | 39 years |
| Second-floor structure | $220,000 | 39 years |
| Second-floor walls & windows | $430,000 | 39 years |
| Second-floor bathrooms | $170,000 | 39 years |
| Second-floor beds & storage | $90,000 | 5 years |
| Second-floor carpet & drapes | $36,000 | 5 years |
| Second-floor room equipment | $36,000 | 5 years |
| Second-floor comfort HVAC | $100,000 | 39 years |
| Second-floor power & alarms | $80,000 | 39 years |
| Commercial laundry equipment | $36,000 | 5 years |
| Breakfast & office equipment | $28,000 | 5 years |
| Pool and paved courtyard | $145,000 | 15 years |
| Poolside seating & umbrellas | $14,000 | 5 years |
| Landscape beds and planting | $50,000 | 15 years |
| Site lighting and entry sign | $35,000 | 15 years |
| Roofs and high eave trim | $265,000 | 39 years |
| **Total depreciable basis** | **$3,800,000** | |

Basis by class: 5 years $402,000; 7 years $18,000; 15 years $515,000; building $2,865,000.

Year-one federal depreciation is **$974,791.67 with 100 percent bonus** and **$148,513.10 without bonus**. The assumed half-year short-life rates are 20 percent, an unrounded 1/7 and 5 percent; the June building deduction is 6.5/468 of basis. A rounded 14.29-percent office-furniture rate adds $0.77. Amounts are deductions, not cash tax savings.

## Sensitivities

The 39-year building treatment assumes transient hotel operation, not long-term dwelling use. If all building basis instead qualified for 27.5-year residential treatment, both year-one totals would increase by $16,640.15 under the same June convention; that alternative is not used.

The independent exterior pool court retains 15 years. If the $145,000 pool court were an integral building component, bonus year one would decrease by $142,986.11 and no-bonus year one decrease by $5,236.11. If the $14,000 portable pool furnishings were 7-year rather than 5-year property, bonus year one would be unchanged and no-bonus year one decrease by $800.00. The separate office furniture deliberately retains 7 years.

The $1M land estimate is not a tax valuation. Changing it changes depreciable basis and the totals. Roof and fixed-building allocations include ordinary associated labor and installation costs. The 24.61 percent short-life share is a hypothetical allocation, not a promised study outcome.

## Primary sources

- IRS Cost Segregation Audit Techniques Guide, Publication 5653: https://www.irs.gov/pub/irs-pdf/p5653.pdf. The guest-room furniture and office-furniture distinction appears in the casino/hospitality matrix on printed pages 217-218; exterior pools built on land are distinguished from building-contained pools on printed page 221. The matrix is used for analogous physical functions, not as a binding ruling for this motel.
- IRS Publication 946: https://www.irs.gov/pub/irs-pdf/p946.pdf. Classes 57.0, 00.11 and 00.3, ordinary building recovery and conventions.
- IRS Publication 527: https://www.irs.gov/publications/p527. The residential-rental definition excludes transient hotel and motel units under its stated facts.
- IRS Notice 2026-11: https://www.irs.gov/pub/irs-drop/n-26-11.pdf. The assumed 100 percent bonus rate concerns qualifying property acquired and placed in service after January 19, 2025.

No tax rates, income-offset eligibility, state treatment or cash figures are calculated.