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Cost Segregation Breakout Process

The following is an example of the “breakout” process that takes place during the analysis of electrical components during a cost segregation analysis. The first step is to compare the panel information obtained in the field to the drawings to ensure that no changes have occurred since they were installed. In similar fashion, the circuits are identified and reviewed against the schematics. The example below shows the circuits that were identified and applied toward the assets that were in place at the time of the study (highlighted cells indicate circuits dedicated to §1245 equipment):

Electrical Room
						UL = Unlabeled
Panel HP		225 Amps	Volts 120/208V 3P/4W		C	S = Spare
	PA	Description		PA		B = Blank (Not Used)
1	1/20	Lights	Lights	1/20	2
3	1/20	Lights	Lights	1/20	4	Standard Formula
5	1/20	Lights	Lights	1/20	6	Total Amps or Total Circuits = 940
7	1/20	Lights	Lights	1/20	8	Dedicated Total = 480
9	1/20	Copy Machine	Receptacles	1/20	10
11	1/20	Coffee Maker	Receptacles	1/20	12	Percentage of Panel = 51.06%
13	1/20	Refrigerator	Hot Water Heater	2/20	14
15	1/20	Disposal	Hot Water Heater		16	Notes:
17	1/20	Site Lights	Site Lights	1/20	18
19	1/20	Site Lights	Site Lights	1/20	20
21	1/20	Site Lights	Site Lights	1/20	22
23	1/20	Ice Maker	Receptacles	1/20	24
25	1/20	Vending	Receptacles	1/20	26
27	1/20	Vending	Receptacles	1/20	28
29	1/20	Receptacles	GFI Counter Recept	1/20	30
31	1/20	Receptacles	GFI Counter Recept	1/20	32
33	1/20	Receptacles	Dishwasher	1/20	34
35	1/30	Computer	Telephone	1/20	36
37	3/30	Air Conditioning	Trash Compactor	3/30	38
39		Air Conditioning	Trash Compactor		40
41		Air Conditioning	Trash Compactor		42

The next step is to compute the percentage of amps on each panel that are dedicated to §1245 property. To do this, divide the total number of amps available on the panel into the amps dedicated to §1245 property (480 divided by 940 = 51.06%). Locate the cost allocation for “panels and switchboards” on cost invoices supplied by the contractor. Apply the amp percentage against the dollars on the panels and switchboard; the end result will be amounts that can be allocated to five- or seven- year assets. In this example, if the one panel and switchboard cost $100,000, the depreciable amount allocated to the equipment would total $51,060.

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Grant Keppel, CPA National Director		Jennifer Birkemeier, CPA Manager