It is always important to remember that in order to be compliant with all federal and state agencies, the following qualifications are not only recommended but essential to ensure a property owner obtains the maximum tax savings allowable by law. The Engineer performing the study should posses the following qualifications:
- An Engineering, construction, and tax backgound to accurately evaluate, identify and classify assets into appropriate categories.
- Knowledge of changing tax laws to ensure taxpayers optimize savings within the proper application of current law.
- Knowledge of prior court cases and rulings pertaining to individual assets to determine what is personal property. According to the IRS’s Chief Counsel Guidance in 1999, the IRS recognizes that there is “No Bright Line Test” for identifying personal property. As rulings in various court cases have proven, different circumstances for the exact same type of asset can change how the asset is depreciated for tax purposes. Therefore, a specialist needs to evaluate the construction method, use, and application of laws pertaining to each asset.
- A comprehensive understanding of the IRS Audit Techniques Guide to ensure an accurate study that can withstand IRS scrutiny in the event of an audit. The IRS Audit Techniques Guide, issued in 2004, outlines the criteria of a quality Cost Segregation Study and provides direction to IRS field agents when reviewing a report that does not employ the methods suggested.
- The abilty to be proactive in the identification of other tax saving opportunities. An independent third party who specializes in Cost Segregation Studies and other Real Estate Tax services can determine if an investor can benefit from other studies such as: Fixed Asset Studies, Abandonment Studies, and more.
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