IRS Cost Segregation Position: Guidelines, Compliance & Audit Considerations
O’Connor studies fully comply with IRS Cost Segregation Guidelines
The IRS fully supports quality cost segregation studies done in compliance with their published guidelines. They publish, in their IRS Field Audit Techniques Guide, checklists for a quality study and quality cost segregation report.
Cost Segregation
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Sari Quinlan
Director of Federal Tax ReductionWhat is Cost Segregation?
Watch this 1:09 video from Roger Hibbs, National Director of Cost Segregation for O’Connor and Associates.
What Makes a Cost Segregation Study High Quality? (13 Key Factors)
From IRS Cost Segregation Audit Techniques Guide
O’Connor’s methodology incorporates all of these elements, unless noted.
01
Preparation by an individual with expertise and experience.
02
Detailed description of the methodology.
03
Use of appropriate documentation.
04
Interviews conducted with appropriate parties.
05
Use of a common nomenclature.
06
Use of a standard numbering system.
Note: This element is not mandatory and is not a routine part of our approach.
07
Explanation of the legal analysis.
08
Determination of unit costs and engineering “take-offs”.
09
Organization of assets into lists or groups.
10
Reconciliation of total allocated costs to total actual costs.
11
Explanation of the treatment of indirect costs.
12
Identification and listing of Section 1245 property.
13
Consideration of related aspects such as IRC 263A, Change in Accounting Method and Sampling Techniques.
Note: Sampling Techniques are not always applicable and are not a routine part of our approach.
Quality Cost Segregation Report
From IRS Cost Segregation Audit Techniques Guide
How to Structure an IRS-Compliant Cost Segregation Report
From IRS Cost Segregation Audit Techniques Guide
O’Connor’s reports include all elements.
- Summary Letter / Executive Summary
- Narrative report
- Schedule of assets
- Schedule of direct and indirect costs (when available)
- Schedule of property units and costs
- Engineering procedures
- Statement of assumptions and limiting conditions
- Certificate
- Exhibits