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Chapter 6.6 | Table of Contents | Chapter 7.1

APPENDIX - CHAPTER 6.7 - INFORMATION DOCUMENT REQUESTS

INTRODUCTION

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.

The use of appropriate Information Document Requests ["IDR’s"] will facilitate the identification of available records for review and the solicitation of records from the taxpayer. The sample IDR language is intended as a suggestion for obtaining records. One or more IDR's may need to be issued and examiners should "tailor" the language to each specific case.

1. Purpose - To identify the participants and their respective roles in the preparation of a cost segregation study/analysis.
   
   Taxpayer, Inc., made changes to cost recovery deductions for its properties based upon recommendations from its consultant through Cost Segregation reports. A review of these recommendations is necessary.
   
   The Engagement Letter/Letter of Understanding between Consultant and Taxpayer, Inc., is requested to show the extent of the Cost Segregation engagement, the steps taken to gather information, and the way in which the work was to be reported.
   
   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.
   
   
2. Purpose - To identify the specific properties subject to cost segregation study/analysis
   Please provide the names and locations of properties visited and inspected by Consultant for use in its Cost Segregation analysis. By reviewing the same properties visited by Consultant, a better understanding of the Cost Segregation Report is achieved.
   
   
3. Purpose - To locate the source of property blueprints and drawings
   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; all that is requested is access to perform an adequate review in a location where the drawings may be unrolled and reviewed easily.
   
   
   
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4. Purpose - To obtain a copy of the cost segregation study
   Please provide a copy of the complete Cost Segregation Study, to include all schedules, spreadsheets, and attachments referred to in the Study.
   
   Please locate the related workpapers for the Cost Segregation Study and hold available for review.
   
   
5. Purpose - To secure a copy of the study computations and formulae
   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.
   
   Please include a description of the software used in preparing the spreadsheets and schedules.
   
   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.
   
   
6. Purpose - To ask specific questions about segregated properties
   The blueprint review is complete. Specific questions about the study remain.
   
   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
   
   These assets were opined to have shorter lives than the building lives.
   
   
7. Purpose - Request for specific items and amounts in question.
   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.

Note: Include all progress payment requests along with the architect’s or construction manager’s certification of the percentage completion (i.e., Application and Certificate for Payment – AIA Form G-702).

PLEASE RESPOND BY: {date}

Chapter 6.6 | Table of Contents | Chapter 7.1