Our Methodology

Every Basis Property Group study rests on one principle: a building is not a single asset depreciating uniformly over thirty-nine years. It is a collection of components, many of which wear out far sooner and qualify for shorter recovery periods. Our methodology identifies those components, quantifies them, and reclassifies them into their correct depreciation lives. The result is a defensible, engineering-based study your CPA can file. Here is how we do it.

The Engineering-Based Approach

Cost segregation is engineering work before it is tax work. Building components are identified, quantified, and reclassified into 5, 7, 15, and 39-year lives. That separation is consistent with the IRS Cost Segregation Audit Techniques Guide and the detailed, engineering-based approaches it describes as the most accurate and most defensible way to allocate cost. We follow that framework rather than rule-of-thumb percentages, because the document trail it produces is what stands up if a return is ever questioned.

What We Examine

A proper study accounts for the whole property. We distinguish structural components, which remain on the 39-year schedule, from the short-life components that do not belong there. In practice that means examining interior finishes; fixtures and equipment; and the site and land improvements that owners most often overlook, including paving, landscaping, and exterior lighting. Each item is quantified and tied back to your building basis so nothing is double-counted and nothing defensible is left behind.

• Structural vs short-life components. The shell stays at 39 years; the parts that wear out sooner do not.
• Interior finishes. Flooring, millwork, specialty wall and ceiling treatments, and decorative finishes.
• Fixtures and equipment. Dedicated electrical, plumbing, and equipment that serves a function rather than the structure.
• Site and land improvements. Paving, landscaping, and exterior lighting, typically 15-year property.

Data First

We do not begin with a blank page. We begin from county and engineering data plus a proprietary data engine covering more than 14,000 Pennsylvania commercial and industrial parcels. That foundation is how we can produce a property-specific Preliminary Benefit Estimate before you commit a dollar. You see a number built from your building's own characteristics first, and you decide whether the benefit clears the bar before any engineered work begins.

Remote and Site-Visit Studies

Not every property requires the same depth, and we match the study to the asset. Smaller or simpler properties can often be studied remotely, using photographs, construction plans, aerial and street imagery, and cost data. Larger or more complex properties are more defensible with a physical inspection by our engineering team, who verify components on site. We tell you which path your property calls for, and we do not over-engineer a study that does not need it.

Standards and Support

The study is aligned to IRS Publication 946 and Treasury Regulation Section 1.168, the authorities that govern how depreciable property is classified and recovered. Every asset classification is documented so the engineering rationale is clear, and audit support is included should a question ever arise. The engineered study itself is performed by our licensed engineering team, which is what gives the final report its professional weight.

Form 3115 and 481(a)

Form 3115 and Section 481(a) apply to property placed in service in prior years. A change in accounting method on Form 3115 takes the depreciation not claimed in prior years as a single catch-up adjustment under Section 481(a). That catch-up comes through in the current year without amending earlier returns. That is how cost segregation reaches property you already own.

Your CPA Files It

We are not your tax preparer, and we do not pretend to be. The engineered study is built to hand directly to your CPA or accountant, who incorporates the reclassified asset lives into your return and files it. You keep your existing tax relationship intact; we simply supply the engineering work and documentation that relationship needs to act on.

Request a Free Estimate »

Sources: IRS Cost Segregation Audit Techniques Guide; IRS Publication 946 (How to Depreciate Property); Treasury Regulation Section 1.168; Internal Revenue Code Sections 168 and 481(a).