Will implementing a cost segregation study increase my audit risk?
No. Cost segregation is an IRS-recognized method of allocating or re-allocating costs to the appropriate asset classifications prescribed under Revenue Procedure 87-56 or IRC Sec. 168. The IRS issued an Audit Technique Guide to assist taxpayers in properly executing a study. PCS follows the guidelines provided in the ATG and conducts its studies and prepares its report in accordance with the ATG's Chapter 4, Principal Elements of a Quality Cost Segregation Study and Report.
I own a building that seems like it would be a good candidate but it was placed into service several years ago. Is it too late to perform a study?
No. A study can be performed at any time during a building's life. No amended returns are required. By filing Form 3115, Application for Change in Accounting Method, you can capture all previously "missed" depreciation deductions on the current year tax return a single, cumulative adjustment, known as an IRC Sec. 481(a) adjustment.
How long does it take to complete a study?
The timing for a study can vary depending on the size of the property, complexity of the project, and detail and availability of documentation provided for use in the study. The sooner information and documentation is provided to PCS, the sooner the study can be complete. The standard turn-around time is 2-4 weeks from the time all documentation is supplied to PCS.
What impact will a study have on my financial situation?
The results of a study can vary greatly depending on the facility type, bonus eligibility, and number of years considered in the analysis. In order to determine the estimated benefit on your particular situation, please contact PCS to have a complimentary cost/benefit analysis prepared.
Isn't an engineer required to perform the study?
No. An engineer designs materials, structures, and systems while considering the limitations imposed by practicality, regulation, safety. There is no engineering performed during a cost segregation study. The IRS recommends using an "engineer-based" approach which simply means that the person who performs the study should use a methodical and reliable approach to cost estimation procedures, rely on reputable cost estimation manuals to allocate costs to segregated property and posses knowledge of the construction process.
How do I determine if a property is a good candidate?