By: Tim Ibbotson
The Service has emphasized “corroborating evidence” and “factually intensive documentation.” The underlying assumption the Service makes is that a cost segregation study is performed by “quality individuals” and “professional firms” that “are competent in design, construction, auditing, and estimating procedures related to building construction.”
A search of cost segregation study methods will produce many options: computer models, alternatives, and various workarounds that come with risks. Partial method alternatives and “cookie-cutter” sampling for each type of building are examples. These methods are a step-up from the rule of thumb methods; however, they do not meet a high-quality standard. Alternative approaches to a cost segregation study are highly likely to come under scrutiny in years to come.
The Audit Technique Guide (ATG) concludes a quality cost segregation study saves time and resources “for taxpayers, practitioners, and Service examiners alike.” That is a strong recommendation and theme repeated in the ATG. Therefore, require and seek “quality” studies from a “professional firm.” Documentation matters. An engineering-based method is defined as the “certain method.”
“Quality Method” Cost Segregation Studies and ROI Considerations
There is no catch to a quality-method cost segregation study. CSSI’s engineering-based cost segregation studies provide the highest standard for documentation and quality in the industry and maximize property identified, therefore, maximizing ROI.
We recommend reviewing historical depreciation schedules, even in cases where building owners and tax professionals believe accelerated depreciation or cost segregation was performed in the past.
Most tax professionals are happy to work with a professional firm that produces a quality cost segregation study to maximize their clients’ ROI because they cannot create an engineering-based study and seek quality documentation.
Don’t leave money on the table or open yourself to scrutiny if you do not document depreciation deductions with quality engineering-based cost segregation studies.