The IRS treats that as a prohibited transaction, regardless of how funds are “allocated” between units.IRA money works best when it’s completely arms-length (often via a self-directed IRA) and for properties you do not live in.

In fact, land allocation is required even without cost segregation.We have debated land allocation on this forum for years.

@Hemant Karira Because this was a newly constructed, detached ADU placed in service in 2025, the depreciable basis for cost segregation is the 120,000 construction cost, not a square footage allocation of the original 900,000 purchase price.The 2022 purchase established basis in the land and original dwelling.

Only the building does.That matters because in high land-value areas (think: beach towns, prime neighborhoods, “walkable” tourist zones), a big chunk of your purchase price may be land.And if more of your price is land…that means less is depreciable.Which means:smaller depreciation deductionsless impact from cost segregationless bonus depreciation than you expectedI’ve seen investors buy an STR expecting a huge write-off, then realize the land allocation killed most of the tax benefit.Before you buy, make sure you understand how much of the purchase is actually depreciable basis (building + improvements) vs. land.It’s not a deal killer — it’s just something you want to model before you close.For STR owners/investors: do you check the land vs. building allocation before buying, or do you only find out after tax time?

Also, depreciation (including any bonus) generally gets allocated based on the portion of the property used for the STR vs. the long-term units, so having a clear breakdown of square footage and use is important.

If you are willing to put in the time to learn the basics of tenant screening, lease management, and maintenance coordination, you can make deals pencil out that would not work otherwise.I see newbies taking this approach without allocating any compensation for the PM efforts.  

Sustained expense estimates should be allocating for these expenses.

Any red flags with allocating FF&E into the purchase price vs separating it?

Is it legally indefensible to self-allocate these costs into their respective useful life bucket for bonus depreciation purposes based on my allocation and receipts?

Usually things like utilities, insurance, repairs, etc. get allocated based on square footage or number of units.Example:If you live in 1 unit of a duplex, generally 50% may be rental and 50% personal (simplified example).6.