IRS Standards for Engineering-Based Studies
The IRS Cost Segregation Audit Techniques Guide establishes standards for quality cost segregation studies. Engineering-based studies that examine actual property conditions and apply accepted engineering principles receive the strongest support under IRS guidelines.
Detailed engineering analysis includes site visits, component identification, and cost allocation using established methodologies. Studies based primarily on estimates without site verification may not meet IRS standards for audit defensibility.
Engineer qualifications matter for study credibility. Cost segregation studies should be prepared or supervised by professionals with engineering credentials and specific experience in property classification for depreciation purposes.
Documentation requirements include detailed reports identifying each reclassified component, explaining allocation methodology, and referencing applicable tax authority. Bare conclusions without supporting analysis may not withstand examination.
Components of a Quality Engineering Study
Site inspection by qualified engineers forms the foundation of detailed studies. Physical observation of components claimed for accelerated depreciation provides evidence supporting classifications and helps identify items that desktop review might miss.
Photographic documentation captured during site inspection supports component identification. Images of items classified as personal property or land improvements provide visual evidence for audit defense.
Cost allocation methodology should be documented and reproducible. Whether using actual costs, contractor estimates, or cost estimation manuals, the approach must be explained clearly enough for verification.
Legal authority supporting component classifications should be referenced in study reports. IRS guidance, court cases, and revenue rulings provide precedent for classification decisions on specific property types.
Choosing Qualified Engineering Firms
Experience with office properties specifically matters for study quality. Firms with extensive office building experience understand typical component configurations and common classification issues in this property type.
Professional credentials including engineering licenses and relevant certifications indicate qualified preparers. CPAs or other professionals may also participate in studies when supported by qualified engineering analysis.
References and track record help evaluate firm quality. Firms with histories of studies that have withstood IRS examination provide greater confidence than newer or untested practitioners.
Study methodology should be explainable and defensible. Before engaging a firm, understanding their approach and how they would defend their conclusions helps evaluate likely audit outcomes.
How Goodlane Group Connects You with Qualified Firms
Goodlane Group maintains relationships with cost segregation engineering firms meeting IRS quality standards. Our network includes firms with specific office property experience and track records of successful examinations.
We help you evaluate firm qualifications relative to your property characteristics. Complex office buildings may require firms with specialized experience, while straightforward properties may be well-served by efficient general practitioners.
Our preliminary analysis helps set expectations for study scope and cost. Understanding what a quality study involves helps you budget appropriately and recognize proposals that may cut corners.
Throughout the engagement, Goodlane Group provides oversight ensuring study quality meets expectations. We review study progress and deliverables to confirm methodology and documentation meet standards.