Does the IRS Require Site Visits for Cost Segregation Studies?
When it comes to conducting a cost segregation study, one common question that arises is whether the IRS requires an in-person site visit. The answer is clear: there is no requirement from the IRS to conduct an in-person site visit. However, this doesn't mean that thorough documentation and inspection of the property should be overlooked.
Understanding the IRS Cost Segregation Guidelines and the Audit Technique Guide
While the IRS does not mandate a physical site visit, the IRS Cost Segregation Audit Technique Guide (ATG) does suggest conducting “field inspections.” It’s important to note that the ATG is not an official IRS document. It serves as a guide and cannot be used, cited, or relied upon as an authoritative source.
However, the recommendations in the ATG are worth considering. According to the guide:
“A field inspection is recommended to document the physical details of the building, type of construction, materials used for construction, the assets contained in the building, the size and types of building systems, and any land improvements that were included in the purchase of the property and the condition of that property at the time of purchase.”
This recommendation highlights the value of thoroughly understanding the physical characteristics of a property, especially when construction drawings and specifications are limited or unavailable. For used or acquired properties, a field inspection is seen as a critical step in accurately reconstructing the construction costs.
How RE Cost Seg Exceeds the IRS Guidelines with Modern Technology
At RE Cost Seg, we believe in going beyond the recommendations to provide even greater value and accuracy in our studies. Instead of a traditional field inspection, we utilize video walkthroughs with our clients or support staff familiar with the property.
This method not only satisfies the field inspection recommendation but surpasses it by offering several key advantages:
1. Comprehensive Documentation: Through a video walkthrough, we gather all the necessary information about the property, including its physical details, construction materials, building systems, and land improvements.
2. Narrative Commentary: The video is narrated by a team member familiar with the property, ensuring that every detail is captured and can be recalled later if needed.
3. Stored Record: The video serves as a permanent record, providing an additional layer of documentation that can be referenced at any time during the study or in the future.
4. Efficiency: This approach allows us to perform inspections remotely, saving time and resources while maintaining the high level of detail required for a quality cost segregation study.
By leveraging modern technology, we not only meet the field inspection recommendations outlined in the ATG but also enhance the quality and reliability of our cost segregation studies. Our commitment to thorough documentation and innovative methods ensures that our clients receive the best possible outcomes, even without an in-person site visit.
Conclusion: Does the IRS Require Site Visits for Cost Seg Studies?
In summary, while the IRS does not require a site visit for cost segregation studies, following the guidance from the Cost Segregation Audit Technique Guide can be beneficial. At RE Cost Seg, we’ve adopted a modern approach that goes beyond these recommendations, utilizing video walkthroughs to provide a thorough, efficient, and documented inspection process. This ensures that every detail is captured, giving our clients confidence in the accuracy and quality of their cost segregation study.
