# Kestervale Works financial assumptions

Kestervale Works is a fictional owner-operated wholesale distribution property costing $4,500,000, including $900,000 of land. This example assumes full business use, acquisition on February 12, 2026 and placement in service on June 15, 2026. It illustrates depreciation deductions, not an appraisal or a completed engineering study.

The 60-by-62-meter warehouse has approximately 40,000 square feet, including about 3,000 square feet of office and staff space. Inventory, pallets and vehicles have no basis in this example.

## Property and recovery periods

The $75,000 permanent loading-dock assemblies are assumed to use 39 years. They include fixed levelers, bumpers, seals and restraints, rather than portable merchandise-handling equipment. Publication 5653 lists permanent dock assemblies with building components on printed pages 204 and 219 and distinguishes removable conveyors and related machinery on page 220. The $30,000 warehouse floor finish is assumed to use 39 years because it is an ordinary permanent polished and sealed wearing surface, not a removable equipment platform or a process-specific installation. The floor-covering discussion on printed page 201 includes directly applied coatings and sealers with building components.

Foundations, walls, columns and structural beams, overhead doors, permanent office floors and partitions, ordinary restrooms, fixed break-room cabinets, comfort HVAC, general electrical service, sprinklers and the roof are assumed to use 39 years. Treasury regulation 1.48-1(e)(2) supplies the structural-component distinction. Building-dependent services have no allocation to the separate site rows. No qualified improvement property or production-property election is assumed.

The $90,000 relocatable racks, $45,000 conveyor and packing benches, $30,000 equipment-only branch circuits and $18,000 strippable carpet are assumed to use the 5-year schedule for a wholesale trade under Publication 946 Table B-2, class 57.0. Racks are bolted for stability, support merchandise rather than the building, and can be moved without material damage. The circuits serve only the handling equipment, not ordinary lighting or general-purpose outlets. The carpet can be removed and reused. Permanent rack-supported construction, mixed-use circuits or permanently bonded flooring would change those facts.

The $28,000 office furniture allocation is assumed to use 7 years under class 00.11. The $16,000 administrative computer, printer and data-network allocation is assumed to use 5 years under classes 00.12 and 00.13. The network serves those information systems, with no stand-alone telephone or general communications allocation.

Independent truck paving, parking, site drainage, yard fences, detached walks, planting and pole-mounted parking lights are assumed to use 15 years under class 00.3. The drainage serves the yard, not the building foundation. Site lighting illuminates circulation and parking rather than serving as removable decorative lighting.

Publication 5653 provides guidance for examiners, not law. None of its industry tables specifically addresses warehouses, RV parks or self-storage facilities. Its permanence and functional-use distinctions support the stated facts by analogy; the activity classes come from Publication 946 Tables B-1 and B-2.

## Allocation

| Component | Basis | Recovery period |
|---|---:|---|
| Truck court | $220,000 | 15 years |
| Employee parking | $90,000 | 15 years |
| Stormwater basin and drains | $70,000 | 15 years |
| Foundation & structural slab | $650,000 | 39 years |
| Warehouse floor finish | $30,000 | 39 years |
| Tilt-up walls and windows | $950,000 | 39 years |
| Structural steel columns | $400,000 | 39 years |
| Overhead loading doors | $65,000 | 39 years |
| Permanent loading docks | $75,000 | 39 years |
| Permanent office flooring | $30,000 | 39 years |
| Office walls and doors | $50,000 | 39 years |
| Restrooms and plumbing | $40,000 | 39 years |
| Break-room cabinets | $20,000 | 39 years |
| Removable office carpet | $18,000 | 5 years |
| Office furniture | $28,000 | 7 years |
| Office computers and network | $16,000 | 5 years |
| Removable pallet racks | $90,000 | 5 years |
| Conveyor and packing benches | $45,000 | 5 years |
| Dedicated equipment circuits | $30,000 | 5 years |
| Comfort heating and cooling | $60,000 | 39 years |
| General power and high bays | $90,000 | 39 years |
| Sprinklers and fire riser | $70,000 | 39 years |
| Fencing and yard gates | $45,000 | 15 years |
| Site walks and service pad | $30,000 | 15 years |
| Planted landscape beds | $30,000 | 15 years |
| Parking and yard lights | $22,000 | 15 years |
| Roof and overhead framing | $336,000 | 39 years |
| **Total depreciable basis** | **$3,600,000** | |

Basis by class: 5 years $199,000; 7 years $28,000; 15 years $507,000; 39-year building $2,866,000. The short-life share is 20.39 percent of depreciable basis.

## Year-one depreciation

With 100 percent bonus depreciation on qualifying short-life assets, the year-one deduction is **$773,805.56**. Without bonus depreciation, the deduction is **$108,955.56**. Both include $39,805.56 of ordinary building depreciation, using June's 6.5 months divided by 468 months under the mid-month convention.

The no-bonus calculation uses unrounded GDS formulas and the half-year convention: 20 percent on 5-year property, 1/7 on 7-year property and 5 percent on 15-year property. No fourth-quarter additions are assumed. Notice 2026-11 supports the 100 percent additional first-year assumption for qualifying property acquired and placed in service after January 19, 2025. Eligibility, elections and the facts of actual ownership and use control a real deduction. Land has no depreciation. No tax rate or cash benefit is illustrated.

## Primary sources

- [IRS Publication 946](https://www.irs.gov/pub/irs-pdf/p946.pdf), printed pages 98-99 and 108, Tables B-1 and B-2; recovery periods and conventions.
- [IRS Publication 5653](https://www.irs.gov/pub/irs-pdf/p5653.pdf), printed pages 201, 204, 219-221; permanent finishes, docks, machinery and site lighting.
- [Treasury regulation 1.48-1](https://www.ecfr.gov/current/title-26/section-1.48-1), paragraphs (c) and (e); tangible personal property and building components.
- [IRS Notice 2026-11](https://www.irs.gov/pub/irs-drop/n-26-11.pdf), additional first-year depreciation.