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): 

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.