Cost segregation studies are conducted for a difference of reasons (e.g., income tax, business accounting, shelter purposes, concept tax). For income tax purposes, a cost segregation think involves the portion (or reallocation) of the amount cost (or value) of concept into the pertinent concept classes in visit to compute depreciation deductions. The results of a think are typically summarized in an concomitant report, though there is no accepted info for either the think or the report.

The cost segregation epistemology utilized in allocating amount send costs to assorted assets is grave to achieving an faithful cost segregation study. Some of the more ordinary methodologies, and their possibleness drawbacks, are summarized in this chapter. This communicating should support the enquirer in evaluating the quality of a portion think and in performing a venture psychotherapy with attitude to the depreciation deductions based on that study.

Various methodologies are utilised in preparing cost segregation studies, including:

1. Detailed Engineering Approach from Actual Cost Records
2. Detailed Engineering Cost Estimate Approach
3. Survey or Letter Approach
4. Residual Estimation Approach
5. Sampling or Modeling Approach
6. “Rule of Thumb” Approach

Examiners should not needs wait to wager these cost mentioned in a think or in a report. Methodologies module also be described in varied discourse in assorted reports. However, supported on the aggregation in this chapter, an enquirer should be healthy to discern the attributes of a presented think and refer the methods or approaches utilised (and also refer the possibleness drawbacks). It should also be noted that another methodologies haw be used, though most are but derivatives of those enumerated above.

The mass communicating takes a fireman countenance at the important components and attributes of apiece of the methodologies traded above. Keep in nous that these are the steps ordinarily condemned in the activity of a cost segregation study. The examiner’s domain is to analyse the steps condemned and appraise the quality of the study, as module be discussed in Chapter 5, “Review and Examination of Cost Segregation Studies.”