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What are the different cost segregation methodologies the IRS allows?
Here is a list of the six most common cost segregation methodologies…
For this discussion, we will address the last in this list…the “Rule of Thumb” Approach. According to the IRS Audit Techniques Guide for Cost Segregation, “…the “Rule of Thumb” approach uses little or no documentation and is based on a preparer’s “experience” in a particular industry. For example, a preparer will estimate IRC Sec. 1245 property as a fixed percentage of project cost by relying on previously determined “industry averages” (e.g., 40% for a manufacturing facility). An IRS examiner should view this approach with caution since it lacks sufficient documentation to support its allocation of project costs.” Continue reading>>>