1959 – Shainberg vs. Commissioner:
The courts ruled (and the IRS subsequently agreed) on the validity of Cost Segregation for tax depreciation on buildings.
1973 – Revenue Ruling 73-410:
This Cost Segregation ruling clarified that a taxpayer may separately depreciate parts of used property if a qualified appraiser ‘properly allocates the costs between non-depreciable land and depreciable building components as of the date of purchase.
1975 – Whiteco Industries, Inc. vs. Commissioner:
The Tax Court, based on an analysis of judicial precedent, developed six questions designed to ascertain whether a particular asset qualifies as tangible personal property.
1986 – Investment Tax Credit (ITC):
ITC is repealed and the new MACRS recovery periods for building depreciation are increased dramatically for property placed in service after 1986.
· Residential property: increased to 27 1/2 years
· Commercial property: increased to 31 1/2 years and increased again to 39 years in 1993<
1987 – Revenue Procedure 87-56:
The wide gap in MACRS recovery periods provides a strong incentive to reallocate costs of buildings placed in service as far back as 1/1/1987. Revenue Procedure 87-56 provides class lives and recovery periods for assets.
1997-1999 – Hospital Corporation of America vs. Commissioner (HCA):
The most recent landmark case that provides legal support to use Cost Segregation Studies for computing depreciation.
1999 – In Action on Decision (AOD) #CC-1999-008:
The IRS acquiesced to the application of ITC principles in the HCA case. Later that year, the IRS Chief Counsel issued further guidance (CCA 19992145) supporting the use of Cost Segregation Studies.
2004 – IRS Issues Audit Techniques Guide:
Outlines the criteria of a quality Cost Segregation Study and provides direction to IRS field agents when reviewing a report that does not employ the methods suggested in the Audit Techniques Guide.