Cost Segregation For Appliances, etc

[Sarah D.]

Can anyone confirm if I am correct in my thinking?  We finished rehab of a 4 unit property and put it into service in 1/2017.  I would like to separate depreciation for the following items that were part of our rehab costs:

• New appliances- 5 year schedule
• Carpet- 5 year schedule
• Vinyl plank flooring- 27.5 year schedule (is this correct?)
• Landscaping- 15 year schedule
• Everything else (kitchens, electrical, bathroom upgrades, paint costs, etc)- 27.5 year schedule

Your thoughts are appreciated (pun intended ;))

[Yonah Weiss]

@Sarah D. First of all I love the 'appreciation' pun ;)

New appliances - 5 year

carpet - depends on how it is affixed 5 or 27.5

Vinyl floor - also should be 5 year

landscaping - some can be applied to 15 year, not all.

Everything else. there are over a dozen categories of items than can be classified as 5-year property.

In short, there is a lot of benefit that you are passing over by not having a proper engineer based study done.

Not only will a proper Cost Segregation study get you 30%+ more benefit, but it is also bulletproof in the event of an IRS audit.

In addition, the IRS dislikes when people and CPAs do guestimates without support or substantiation of their evaluation.

The following is a case excerpt to this point.

A “quality” cost segregation study is “both accurate and well documented[.]” Id. A taxpayer's estimated assumptions, based on guesses without supporting records, cannot form the basis for acknowledgment of a plaintiff's claim. Boddie-Noell Enterprises, Inc. v. United States, 36 Fed Cl 722, 741 (1996), aff'd, 132 F2d 54 (Fed Cir 1997); L.W. Hardy Co. v. United States, 1 Cl Ct 465, 470-71 (1982).