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Sources & Citations

Every claim on this site is checked against a primary source: an IRS publication, a Treasury regulation, a decided case, or the statute itself. We do not rely on secondhand summaries, and we do not ask you to either. Below are the authorities our methodology and our copy are built on, with a plain-English note on what each one establishes.

Primary Authorities

AuthorityWhat It Establishes
IRS Publication 946
How to Depreciate Property		 The IRS's own guide to depreciation methods, recovery periods, and how property is classified into the 5, 7, 15, and 39-year lives that a cost segregation study reassigns. This is the baseline reference for how depreciable property is supposed to be treated.
Treasury Regulation §1.168 The Treasury regulations implementing Internal Revenue Code Section 168, the Modified Accelerated Cost Recovery System (MACRS). This is the regulatory authority for the recovery periods and classification rules a study applies to each building component.
IRS Cost Segregation Audit Techniques Guide (ATG) Published by the IRS for its own examiners, the ATG describes in detail how a defensible cost segregation study is performed, including the engineering-based approach we align to. An IRS-authored guide to auditing these studies is also, functionally, a guide to what a study needs to look like to hold up.
Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997) The U.S. Tax Court decision that resolved the IRS's challenge to component depreciation in favor of the taxpayer. This case is the legal foundation of the modern cost segregation industry: it confirmed that separately identifiable building components can be depreciated over their own, shorter recovery periods rather than the building's full schedule.
One Big Beautiful Bill Act (OBBBA), Section 168(k) & IRS Notice 2026-11 OBBBA, signed July 2025, permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025, eliminating the scheduled phase-down. IRS Notice 2026-11 provides implementing guidance. Together they are why the components a cost segregation study identifies, property with a recovery period of 20 years or less, can be deducted in full in the year the study is filed rather than spread out over time.

How We Use These Sources

Our methodology is written to the framework the Audit Techniques Guide describes: components identified, quantified, and reclassified into their correct recovery lives, documented well enough to survive a question from an examiner. Every Preliminary Benefit Estimate we produce is modeled against Publication 946 and Section 1.168 classification rules, and every estimate is labeled preliminary, illustrative, and not tax advice, because the authorities above govern the engineered study, not our model of it.

Where the law is genuinely a judgment call, we say so. Depreciation recapture on sale is a real cost-benefit tradeoff, not a footnote, and OBBBA's restoration of 100% bonus depreciation does not change the underlying classification rules; it changes how much of what is properly classified as short-life property gets deducted, and when.

A Note on Currency

Tax law changes, and guidance is updated. We review this page against IRS Publication 946, Treasury Regulation §1.168, and the Cost Segregation Audit Techniques Guide on an ongoing basis. If you find a citation here that appears out of date, tell us at [email protected] and we will correct it.

Basis Property Group is a cost segregation advisory and brokerage. It is not a certified public accounting firm or a law firm, and nothing on this page constitutes tax, legal, or accounting advice. The sources above are cited for informational and educational purposes. Consult your CPA or tax attorney about how any of these authorities apply to your specific property and return.

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IRS ATG Aligned  ·  Methodology per IRS Pub 946 & Treas. Reg. §1.168  ·  Engineering-based component studies  ·  Form 3115 / 481(a) look-back  ·  Works directly with your CPA
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Content reviewed against IRS Publication 946, Treasury Regulation §1.168, and the IRS Cost Segregation Audit Techniques Guide. For educational purposes only; this site does not constitute tax advice. Consult your CPA before filing. Not affiliated with the IRS.