IRS Updates Audit Technique Guide for Cost Segregation

On June 1st, 2022, the IRS published the latest edition of the Cost Segregation Audit Technique Guide (ATG).

The Cost Segregation Audit Technique Guide (ATG) aids IRS examiners during audits by providing:

·       Technical Information

·       Examination Techniques

·       What to look for when reviewing cost segregation reports

While the ATG is not authoritative, it does provide valuable guidance for IRS employees. Because of this, tax professionals also look to the AGT for guidance on properly performing cost segregation studies. Updated sections that have been recently adjusted and expanded will provide helpful insight into the IRS’s future examination focus.

Why the Changes?

First published in 2004, the AGT has been revised throughout the years to reflect changes in the tax code. The most recent changes were necessary due to changes related to the Tax Cuts and Jobs Act of 2017 (TCJA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

What’s New in the IRS Audit Technique Guide for Cost Segregation?

·       IRC Section 263A

·       Accounting Method Changes

·       Depreciation And Bonus Depreciation

·       Deductions Under IRC Sections 179 and 179D

·       Qualified Improvement Property

·       Changes in tax law from the PATH, TCJ, and CARES ACTs

·       Land and Building Depreciable Basis Allocations

·       Issue Specific Guidance on Electrical Distribution Systems (New Chapter 8)

Is Your Cost Segregation Study “Audit-Proof”

The 2022 version of the AGT includes and increases emphasis on electrical distribution systems and how to decide whether an electrical component should be classified as either a structural component or personal property. This is something to keep in mind when performing cost segregation studies to ensure they are audit-proof. Future audits could look more closely at whether the amount of the electrical distribution system taken as personal property lines up with the correct electrical load analysis for the property.

An engineering-based cost segregation study, such as those performed by M&E Cost Segregation, will correctly analyze the electrical loads of a property and each electrical component.

We Stand Behind Our Studies

While you can’t always avoid an audit, at M&E Cost Segregation, we meet or exceed IRS recommendations for performing cost segregation studies. That’s why we are confident that our studies will stand up to scrutiny. And if an IRS audit does occur or any questions are raised, we will defend our studies at

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