The preceding chapters described the legal framework for classifying assets ( Chapter 2), common methods utilised to segregate costs ( Chapter 3), and elements of a quality outlay segregation think and report (Chapter 4). This chapter provides suggested inspect steps for reviewing and examining a outlay segregation study.

The appropriate inspect steps depend on the nature and size of the segregation project as well as on the coverall quality of the study. Cost segregation is a factually intensive determination that is based on complex tax law and engineering analysis which is used in cost segregation audit techniques guide. While agents haw be healthy to evaluate the adequacy of whatever outlay segregation studies (e.g., smaller projects), other studies haw require specialists with expertise, business experience and special training.

The Engineering Program in LMSB is the principal source of technical expertise for examining outlay segregation studies. The Computer Audit Specialist (CAS) Program in LMSB is also available to provide assistance when a think is based on statistical sampling. Formal advice, using the referral process, should be solicited through the LMSB scheme site (IRWEB/LMSB/Field Specialists/, and select Engineers or CAS) and the Specialist Referral System (SRS). Informal advice is also available by contacting your local specialist group.

The suggested inspect steps are presented below in an outline format. In order to have a better discernment of these steps, examiners haw want to refer to Appendix Chapter 6.6 in IRS for a brief overview of the construction process. While whatever steps module not apply to all studies, each step should be carefully considered before moving on to the next one.

Some taxpayers have filed claims based on a cost segregation think of leased property. Typically, leases were assigned to 39-year feat concept on the original returns. Subsequently, the taxpayer re-determines its allowable depreciation on the basis that the acquisition was for friendliness rather than for the lease. The goodness is a potential 15-year diminution of friendliness pursuant to IRC § 197 (if the acquisition otherwise qualifies under § 197). Examiners should closely scrutinize allocations of this type.