How the two strategies interact
When you exchange into a replacement property, your depreciable basis carries over from the relinquished property plus any new money added. A cost segregation study applied to that basis reclassifies the short-life components of the new property, letting you depreciate them over 5, 7, or 15 years rather than 39.
The result: you defer the gain on the sale and accelerate deductions on the purchase — improving after-tax cash flow in both directions.
Timing the study
Commission the study in the same tax year you close on the replacement property. Your qualified intermediary handles the exchange mechanics; the cost segregation firm works independently with your CPA. Neither delays your closing inside the 180-day window.
Why the replacement property's buildout matters
The more finished the replacement property's interior, the more a study can typically reclassify. A turn-key executive office suite — with partitions, kitchens, dedicated systems, and high-end finishes — offers substantially more short-life property than a raw shell.
A current example: Suite 200 at 599 Tamiami Trail N
This fully built-out executive office condo in the heart of Old Naples is offered at $1,500,000 with a 4.67% cap rate and $70,000 in net operating income. The tenant is in place on a lease running through 2029, so a buyer steps directly into stabilized income with no lease-up risk.
Fee-simple title, a prestigious downtown address, and a turn-key buildout make it a clean, quick close — important for anyone working inside a 1031 exchange timeline or placing capital before year-end.