The IRS has challenged the classification components of cost segregation studies done for major corporations such as AmeriSouth XXXII, Ltd. They are calling into question the validity of cost segregation studies and its “savings” to taxpayers. The courts have generally ruled in favor of the IRS, however, even after such rulings, many believe that the value of a cost segregation study is enhanced rather than diminished.

The AICPA wrote an article titled: Is the Value of Cost Segregation Depreciating?

“In AmeriSouth, the IRS challenged the classification of component costs of AmeriSouth’s large apartment complex properties. AmeriSouth had used the services of a company purportedly specializing in asset classification and cost-segregation analysis for federal income tax purposes. Despite the cost-segregation study, the IRS argued that many of the types of component costs of the properties that the taxpayer treated as personal property or land improvements, in accordance with the conclusions of the cost-segregation study, should properly be classified as costs of structural components of the buildings to which they pertained.”

Read the full article at:

Author: Mark W. Blazek, CPA. “Is the Value of Cost Segregation Depreciating?”  

KBKG also commented on the AmeriSouth and Peco case.
» Read KBKG’s AmeriSouth commentary
» Read KBKG’s Peco commentary