Information Document Requests

G. Information Document Requests

G.1. Introduction

(1) Appropriate documentation is needed to support the conclusions in a cost segregation study. Once an examination has revealed the use of cost segregation techniques, the examiner needs to review the supporting documentation to determine whether an examination is warranted and, if so, the scope of the examination.

(2) The use of appropriate, issue-focused Information Document Requests (IDRs) will facilitate the identification of available records for review and the solicitation of records from the taxpayer. It will also set in writing a mutually agreeable timeframe for when the information should be provided. The sample IDR language below is intended as a suggestion for obtaining records. One or more IDRs may need to be issued and examiners should tailor the language to each specific case and follow the Large Business and International (LB&I) directives. For additional information on the IDR process refer to IRM 4.46.4.7 – Information Document Request Process.

G.2. IDR 1 Purpose – To Identify the Participants and their Respective Roles in the Preparation of a Cost Segregation Study/Analysis

(1) Please provide documentation to support all changes to the cost recovery deductions indicated on the Cost Segregation Reports.

(2) Please provide the Engagement Letter/Letter of Understanding between Consultant and Taxpayer, Inc., that shows the extent of the Cost Segregation engagement, the steps taken to gather information, and the way in which the work was to be reported.

(3) Additionally, a conference is requested with a representative from Consultant to describe the Cost Segregation process and to answer questions concerning the style and general cost computations. It is expected that a telephone conference will be suitable, provided the Engagement Letter/Letter of Understanding has been furnished.

G.3. IDR 2 Purpose – To Identify the Specific Properties Subject to Cost Segregation Study/Analysis

(1) Please provide the names and locations of properties visited and inspected by Consultant for use in its Cost Segregation analysis.

(2) Note to examiner: By reviewing the same properties visited by Consultant, a better understanding of the Cost Segregation Report is achieved.

G.4. IDR 3 Purpose – To Locate the Source of Property Blueprints and Drawings

(1) Please provide access to the construction drawings and specifications used by Consultant to perform its Cost Segregation Study. It is not necessary to duplicate the drawings. If the construction drawings are in hard-copy format, please provide access to them in a location where the drawings may be reviewed. If they are in an electronic format, a copy should be provided with the information requested in IDR G.4 (all related workpapers).

G.5. IDR 4 Purpose – To Obtain a Copy of the Cost Segregation Study

(1) Please provide a copy of the complete Cost Segregation Study, to include all schedules, spreadsheets, and attachments referred to in the Study.

(2) Please locate the related workpapers for the Cost Segregation Study and hold available for review.

G.6. IDR 5 Purpose – To Obtain a Copy of the Study Computations and Formulae

(1) The Cost Segregation Study is described as containing numerous spreadsheets and schedules used in arriving at the summary recommendations. Please provide a machine sensible copy of the data files used in preparing and printing the spreadsheets and schedules.

(2) Please include a description of the software used in preparing the spreadsheets and schedules.

(3) Please provide an index to the machine sensible files (or other description of the file titles and how the files are identified). If the machine sensible copy is a visual copy, or value only copy, then an additional description and presentation of the mathematical formulae used to perform the computations is also requested.

G.7. IDR 6 Purpose – To Ask Specific Questions about Segregated Properties

(1) The blueprint review is complete. Specific questions about the study remain.

(2) With regard to the “Quantity Take Off” schedules prepared by Consultant for the properties, there are certain unidentified assets that would fit into more than one MACRS class, depending upon location and use in the taxpayer’s business. Please provide a copy of the detailed listing of the Consultant’s selected assets, showing use and location for:

• Receptacles in Kitchen
• Junction Boxes in Kitchen
• Disconnect Switches in the Kitchen
• Receptacles in Offices
• Junction Boxes in Offices
• Circuit Breakers in Offices
• Receptacles in Lab areas
• Junction Boxes in Lab areas
• Floor Drains in Kitchen
• Sinks in Kitchen
• 3” pipe in Lab areas
• 1” pipe in Lab areas

(3) These assets were opined to have shorter lives than the building lives.

G.8. IDR 7 Purpose – Request for Specific Items and Amounts

(1) Please provide copies of all construction contracts, addenda, purchase orders, change orders (including the Contract Bid breakdowns) for each item listed below. Note: The Property Unit Numbers and Descriptions were obtained from the formal Cost Segregation Analysis.

(2) The following table shows the segregated property categories and amounts:

(3) Note: Include all progress payment requests along with the architect’s or construction manager’s certification of the percentage completion (e.g., Application and Certificate for Payment – AIA Form G702).