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What’s involved in a cost segregation study?

September 9, 2015

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A no-cost discussion of the opportunity
At CSH we offer a no-fee cost-segregation feasibility discussion so that you can consider whether a study will benefit you. We’ll take a look at your company and determine if conducting a study is likely to hold benefit for you and your unique situation.

Fact-Based Analysis with the Expertise to Back It Up
When a cost segregation study is recommended, our team of specialists will respond. Our work will be based on the Internal Revenue Code, Treasury regulations, court cases, and revenue rulings using the following proven five-step process:

  • Reporting – We create a comprehensive, easy-to-understand report detailing our findings and providing the documentation you need to justify the asset segregation, as well as references to tax citations and court rulings that support your deductions.
  • Identification – We allocate material components, direct labor, and indirect costs using industry-standard construction cost data and all available invoices and construction contracts.
  • Examination – Our cost segregation professionals use an engineering-based approach (required by the IRS) to determine how assets should be reclassified. Depending on your situation, this involves a complete review of architectural and engineering drawings or an extensive site visit.
  • Filing – We help you file an accurate report with your annual tax return – one that will withstand an auditor’s scrutiny. We also help you properly inform the IRS of the changes in your accounting procedures.
  • Representation – Our professionals are available to represent you in the event that any of the resulting asset classifications are questioned in a government audit.

Scope of Study
During the examination and identification steps, CSH cost segregation specialists will:

  • Review all available cost data including closing documents, property appraisals, general contractor’s final application for payment with change orders, and any additional invoices.
  • Analyze all available construction drawings for the subject property to identify the Section 1245 property and land improvements that may qualify for a shorter recovery per
  • Conduct a detailed site inspection of the property to ascertain the nature and use of all items of personal property.
  • Re-create costs for specific items (based on replacement cost estimates) where detailed cost data is not available.
  • Prepare detailed schedules summarizing the results of our depreciation analysis. The supporting schedules will include the direct costs, indirect costs, total costs, and appropriate tax life for each item of property.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Guidance

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