Cost seg

What is ACRS?

Accelerated Cost Recovery System. Applies to property first used before 1987 and governs depreciation recovery rules for tangible property placed in service after 1980 and before 1987.

What is ADS?

Alternative Depreciation System. One of the depreciation systems under MACRS used to recover basis over prescribed recovery periods.

What are Actual Cost Records?

Costs derived from contemporaneous construction and accounting records; considered strong support in engineering-based cost segregation methodology.

What is Adjusted Basis?

Original property cost plus additions/improvements minus depreciation, casualty losses, and certain deductions.

What is Asset Classification in cost segregation?

The identification and assignment of construction improvements into asset classes such as land, land improvements, building, equipment, furniture, fixtures, and tangible personal property.

What is Bonus Depreciation?

A special depreciation allowance permitting additional first-year depreciation deductions for qualifying property placed in service during eligible periods.

What are As-Built Plans?

Final construction plans showing how a project was actually built, including all changes from the original plans.

What are Architectural Drawings?

Plans showing project layout, floor plans, elevations, dimensions, and architectural finishes used during construction.

What is an Architectural Floor Plan?

A drawing showing room layouts and potentially furniture, fixture, and equipment layouts within a building.

What is a Certificate of Occupancy?

Written authorization from local government stating a structure is ready and fit for occupancy.

What is a Change Order?

A written modification to a construction contract involving changes in specifications, scope, or performance requirements.

What is Class Life?

The number of years establishing the recovery period for property under GDS or ADS depreciation systems.

What does ASCSP stand for?

American Society of Cost Segregation Professionals.

What does CCSP stand for?

Certified Cost Segregation Professional.

What is the Cost Segregation ATG?

IRS Audit Techniques Guide used by examiners and practitioners to analyze and review cost segregation studies.

What is Capitalized Interest?

Interest that must be added to the basis of produced property under uniform capitalization rules instead of currently deducted.

What are Allocated Indirect Costs?

Indirect costs such as architecture fees, engineering fees, and construction interest allocated to asset classifications.

What is an Allocated Premium/Discount?

The reconciling adjustment required to align adjusted replacement cost with depreciable basis in engineering/residual studies.

What is Adjusted Replacement Cost?

Replacement Cost New less deterioration and obsolescence attributed to assets within a classification. Also called RCNLD.

What is Functional Obsolescence?

Loss in value caused by outdated design, inefficiency, or inadequacy of an asset relative to current standards.

What is Allocation of Land and Land Development Costs?

The treatment of roads, sewer lines, utilities, and subdivision improvements generally allocated to non-depreciable land accounts.

What is a Bid Bond?

A bond guaranteeing payment of the difference between a contractor’s bid and the next lowest bid if the contractor fails to execute the contract.

What is a Building Permit?

Permission granted by local government to construct or improve property.

What is a Closing Statement?

A settlement statement detailing the financial accounting of a real estate transaction.

What is a Commercial Contractor?

A contractor specializing in commercial construction such as offices, retail centers, apartments, hospitals, and industrial buildings.

What is a Centerline?

A line on a drawing denoting the center of an object and dividing it into equal parts.

What is an Architectural Scale?

A specially designed ruler used to measure and interpret architectural plans.

What is an Arc in geometry?

A curved portion of a circle’s circumference expressed by angle or length measurements.

What is a Chord?

A line segment connecting two points on a curve.

What is Circumference?

The total distance around the outside of an object.

What are Civil Drawings?

Drawings showing site details and topographical information.

What is Certification in a cost segregation report?

A statement confirming the signer developed the analysis, opinions, and conclusions of the report.

What is a Chart of Accounts?

A serial listing of all ledger accounts maintained by a business.

What is Capital Expenditure?

Money spent to acquire, improve, or extend the life of fixed assets.

What is Capital Improvement?

An improvement that increases the value of a property or asset.

What is Capitalized Cost?

A cost deducted over multiple years through depreciation or amortization.

What is Business/Investment Use?

The percentage of property used for business or investment purposes.

What is a Cash Method taxpayer?

A taxpayer recognizing income when received and expenses when paid.

What is the Accrual Method?

A method recognizing income when earned and expenses when incurred.

What is a Cost Segregation Study?

An engineering-based analysis identifying assets eligible for shorter depreciation lives.

What is Depreciable Basis?

The portion of basis eligible for depreciation after reductions such as land allocation.

What is an Engineering Approach Methodology?

A detailed methodology using engineering estimates, actual costs, plans, and records to classify assets.

What is a Residual Estimation Technique?

A method where remaining basis after identified assets is assigned to remaining building structure.

What is MACRS?

Modified Accelerated Cost Recovery System used for tax depreciation after 1986.

What is GDS?

General Depreciation System under MACRS.

What is PIS (Placed in Service)?

The date property is ready and available for its intended use.

What is QIP?

Qualified Improvement Property consisting of qualifying interior improvements to nonresidential real property.

What is a Land Improvement?

An improvement to land such as paving, sidewalks, landscaping, or site lighting generally depreciated separately from buildings.

What is Tangible Personal Property?

Property that is not permanently attached and is generally movable or accessory to business operations.

What is Section 1245 Property?

Generally tangible personal property and certain depreciable property subject to ordinary income recapture rules.

What is Section 1250 Property?

Generally depreciable real property such as buildings and structural components.

What is a Structural Component?

A component relating to operation or maintenance of a building such as walls, HVAC, plumbing, or roofing.

What is a Dedicated Electrical System?

Electrical serving specific equipment rather than the building generally.

What is a Dedicated Plumbing System?

Plumbing serving specialized equipment instead of the building overall.

What is a Partial Asset Disposition?

A tax election allowing write-off of remaining basis in disposed building components.

What is a Form 3115?

Application for Change in Accounting Method.

What is a Section 481(a) Adjustment?

The cumulative adjustment required when changing accounting methods.

What is an ATG?

Audit Techniques Guide issued by the IRS.

What is Whiteco Analysis?

A set of factors used to determine whether property is personal property or structural property.

What is a Load-Bearing Wall?

A wall supporting structural weight of the building.

What is Decorative Millwork?

Decorative architectural finish work potentially classified as personal property depending on permanence and function.

What is Specialty HVAC?

HVAC serving specialized business equipment or processes rather than general building comfort.

What is General Building Electrical?

Electrical systems serving overall building operation and occupancy.

What is RCNLD?

Replacement Cost New Less Depreciation.

What is Functional Allocation?

Allocation of costs among asset categories based on use and supporting documentation.

What is a Certificate for Payment?

Statement prepared by an architect informing the owner of amounts due to contractors for completed work.

What is a Change Order Log?

A record of modifications increasing or decreasing total contract price during construction.

What is a Progress Billing?

Periodic contractor billing based on percentage of work completed.

What is Retainage?

A portion of payment withheld until project completion to ensure satisfactory performance.

What is a Build-to-Suit project?

A project where improvements are constructed to tenant specifications under a long-term lease arrangement.

What is a Site Inspection?

Physical inspection used to identify and verify assets and classifications in a study.

What are Construction Drawings?

Plans and specifications showing how a project is to be built.

What is a Prime Contractor?

The primary contractor responsible for completion of a construction project.

What are Soft Costs?

Indirect construction costs such as architecture, permits, engineering, and interest.

What are Direct Costs?

Costs directly attributable to specific construction activities or assets.

What is an Indirect Cost?

A cost benefiting multiple project components and allocated among assets.

What is an Engineering-Based Cost Segregation Study?

A study using engineering analysis, construction records, and tax law to classify assets for depreciation.

What is the primary goal of a cost segregation study?

To identify building components eligible for shorter MACRS recovery periods and accelerated depreciation.

What is the difference between §1245 and §1250 property?

§1245 generally includes personal property and certain tangible assets subject to ordinary income recapture; §1250 generally includes depreciable real property and structural components.

What is considered non-depreciable land?

The underlying land itself, excluding depreciable land improvements.

What are common examples of 15-year land improvements?

Parking lots, sidewalks, curbing, fencing, landscaping, retaining walls, and site lighting.

What is a structural component?

A component relating to operation or maintenance of the building such as HVAC, plumbing, walls, floors, ceilings, elevators, or roofing.

What is dedicated electrical?

Electrical serving specific equipment rather than the building generally.

What is dedicated plumbing?

Plumbing serving specialized equipment instead of overall building use.

What is specialty HVAC?

HVAC serving specialized equipment or processes rather than general building comfort.

What is general building electrical?

Electrical serving lighting, outlets, and standard building operations.

What is general building plumbing?

Plumbing serving standard occupant use of the building.

What is decorative millwork?

Decorative trim or finish carpentry potentially classifiable as personal property depending on permanence and function.

What are Whiteco factors used for?

To analyze whether property is inherently permanent or tangible personal property.

What is inherently permanent property?

Property expected to remain affixed indefinitely as part of the building structure.

What is a load-bearing wall?

A structural wall supporting building loads.

What is QIP?

Qualified Improvement Property consisting of qualifying interior improvements to nonresidential real property.

What improvements are excluded from QIP?

Building enlargements, elevators/escalators, and internal structural framework.

What recovery period does QIP generally receive under GDS?

15 years.

What is ADS?

Alternative Depreciation System requiring longer recovery periods for certain property.

What is GDS?

General Depreciation System under MACRS.

What is MACRS?

Modified Accelerated Cost Recovery System used for tax depreciation.

What is placed in service (PIS)?

The date property is ready and available for its intended use.

When is a renovated building considered placed in service?

When renovation is complete and the property is ready for its intended use.

What is a lookback study?

A cost segregation study performed after the original filing year to catch missed depreciation.