Cost Segregation Study - Cost Segregation Study Process

Cost Segregation Study Process

"A cost-segregation specialist can perform a nonintrusive yet detailed engineering study of a building's walls, flooring, and ceilings; and its plumbing, electrical, lighting, telecommunications, heating and cooling systems" (Money Doesn't Grow on Trees, But It Could be Hidden in the Walls By William J. Barnes, CPA).

Usually, a construction engineer will analyze architectural drawings, mechanical and electrical plans, and other blueprints to segregate the structural and general building electrical and mechanical components from those linked to personal property. The study also allocates “soft costs,” such as architect and engineering fees, to all components of the building.

"In general, a study by a construction engineer is more reliable than one conducted by someone with no engineering or construction background. However, the possession of specific construction knowledge is not the only criterion. Experience in cost estimating and allocation, as well as knowledge of the applicable law, are other important criteria. A quality study identifies the preparer and always references his/her credentials, experience and expertise in the cost segregation area" (www.irs.gov - Cost Segregation Audit Technique Guide - Chapter 4 - Principal Elements of a Quality Cost Segregation Study and Report).