What are the “Summary and Conclusions” of the IRS regarding Cost Segregation Study Methodologies?
Cost segregation studies are prepared for a variety of reasons (e.g., income tax, financial accounting, insurance purposes, property tax), and many different methodologies and procedures are used. While neither the Service nor any group or association of practitioners prescribes a specific methodology, there are certain approaches (e.g., studies based on actual costs or on proper estimation techniques) that produce more accurate and reliable allocations. Despite the use of one of these more reliable methods, issues may still arise with respect to the proper classification of ยง 1245 property. Methodologies that yield accurate cost allocations expedite the Service’s review, saving time and resources for taxpayers, practitioners, and Service examiners alike. A study that is both accurate and well documented is considered (in this ATG) a “quality” cost segregation study. The specific characteristics that comprise a quality study are described in Chapter 4, “Principal Elements of a Quality
