Key Takeaways
- The IRS challenged 3 of 40+ component classifications; 2 were fully sustained, 1 was partially reclassified.
- The investor retained 92.6% of the original cost segregation benefit after audit adjustment.
- Audit defense costs ($8,500) were 4.5% of the retained benefit ($166,820)—a justified investment.
- Engineering-based studies with physical inspections and legal citations survive audits far better than desktop studies.
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Test Your Knowledge
1.What typically triggers an IRS audit of a cost segregation study?
2.In a case study where an IRS examiner challenges a cost segregation study, what documentation element most frequently resolves the dispute?
3.What is the resolution outcome when a cost segregation study is successfully defended in an audit?