Note: Each chapter in this Audit Techniques Guide (ATG) can be printed individually. Please follow the links at the beginning or end of this chapter to either return to the Table of Contents or proceed to the next chapter.
Preface – 2016 UPDATE
The 2016 update of the Cost Segregation Audit technique Guide was accomplished with collaboration led by the Deductible & Capital Expenditures Practice Network (DCE PN). Throughout, organizational titles and contact information have been updated.
Chapter 2, Legal Framework, has been reorganized, expanded, and updated. It includes a new section on the Early History of Depreciation and an expanded discussion of Bulletin "F." The information in the previously titled section Component Depreciation has been re-organized and expanded with the history of depreciation that continues with new sections Codification of Depreciation Changes and the Guideline Life System. The sections ad-dressing the ADR depreciation system, ACRS, and MACRS have been expanded. The next sections address the rules defining property, beginning with Section 1245 Property And Section 1250 Property and then Investment Tax Credit IRC § 48, under which "tangible personal property" and "building" and "structural components" of a building are defined. The next sections address Tests for Distinguishing Section 1245 And Section 1250 Property, including the Inherently Permanent Test, the impact of the Hospital Corporation of America Case, and Electric Distribution Systems. This chapter concludes with overviews of the Incentives for Cost Segregation and Audit Guidance that the Service has issued.
Chapter 3, Cost Segregation Approaches, previously titled Cost Segregation Methodolo-gies, includes elaboration on existing topics and updates for clarity and consistency in ter-minology. It is expanded with new material addressing acquired properties and field in-spection of property.
For Chapter 5, Review and Examination of a Cost Segregation Study, a goal was to make it more usable to both Agents and Engineers. The steps for performing the risk analysis were expanded. The steps overall were grouped into Risk Analysis steps, Examination steps to be taken when warranted by the risk analysis, and steps falling under Other Con-siderations as these steps may not be applicable for every examination situation. The Cost Analysis section addressing Existing or Acquired Property includes an expanded discussion of real estate and Section 1060 allocations. The steps in the Review Sampling Techniques section were updated, including reference to the statistical sampling requirements contained in Rev. Proc. 2011-42.
The Appendices of Chapter 6 have been revised and are now included as Special Topics Chapters. Chapter 6.2, Change in Accounting Method, has been expanded and updated and addresses the 2006 final regulations under section 446(e) and the Peco Foods case.
Chapter 6.3, Depreciation Overview, has been re-written, focusing on depreciation under MACRS provides a summary of the applicable authorities and available guidelines for classifying property into their appropriate classes for computing depreciation.
Chapter 6.4, Relevant Court Cases, has been reorganized and updated, including updated CSI MasterFormat Divisions, and contains expanded case listings and comments in two tables to assist engineers and examiners in locating pertinent cases.
Chapter 6.5, Inherently Permanent Standard Under §168, §263A, and §199, replaces the outdated former appendix, Statistical Sampling, which contained a 2009 Field Directive on the Use of Estimates from Probability Samples. The all new chapter 6.5 compares and contrasts the inherently permanent standard applicable to each code section.
Chapter 6.6, Construction Process, has been updated, including more recent CSI Master-Format Divisions, and adds a summary of other construction project delivery methods.
Chapter 6.7, Information Document Requests, has been updated to coordinate with current LB&I IDR procedures.
Chapter 6.8, Bonus Depreciation Considerations, is an all new chapter addressing bonus depreciation and guidance on the application of bonus depreciation to a cost segregation study.
Chapter 7, Industry Specific Guidance, has been expanded with a new matrix contained in Chapter 7.6. This matrix will provide assistance to agents in the examination of taxpayers that depreciate real and tangible property used in motor vehicle or product manufacturing industries.
Chapter 8, Issue Specific Guidance, has been expanded with a new chapter 8.2 addressing Stand-Alone Open-Air Parking Structures and their classification as buildings.