Join tax and audit expert Justin Shore, who defends clients in IRS challenges, and Nathan Sosa, a real estate tax pro, as they delve into the intricate world of cost segregation audits. They discuss alarming trends in IRS scrutiny, particularly highlighting the risks associated with software-only studies lacking real site evidence. Listeners will learn the crucial role of material participation logs, why recent IRS guidelines signal increased challenges, and how to enhance study defensibility to protect deductions and avoid audits.
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insights INSIGHT
Auditors Often Lack Cost Segregation Familiarity
Examiners often struggle to understand cost segregation studies on first encounter.
That confusion drives detailed questioning about how depreciation figures were determined.
volunteer_activism ADVICE
Keep Your Material Participation Log Updated
Keep a current material participation log because auditors ask for it in nearly every audit.
Maintain it proactively to avoid last-minute gaps during examiner requests.
insights INSIGHT
IRS Is Targeting Five-Year Property Classifications
Auditors are increasingly attacking 5-year (Section 1245) property classifications.
Items like cabinets or certain fixtures are being recharacterized as 27.5-year structural property.
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In this episode of the Tax Smart REI Podcast, Thomas Castelli, Nathan Sosa, and Justin Shore unpack what’s really happening inside today’s IRS cost segregation audits - why certain studies get challenged, the patterns auditors are catching, and the hidden risks most investors never hear about.
You’ll learn:
- The #1 issue auditors are flagging in cost segregation studies (and why software reports get hit hardest)
- Why missing link that can tank a study’s defensibility and lower your depreciation results
- How recent updates and language in the IRS Cost Segregation Audit Technique Guide signal a shift in scrutiny
- What the AmeriSouth case tells us about “quality” studies—and how to avoid repeating the same mistake
- Whether software-driven providers might be becoming more conservative and what that means for your ROI
Perfect if you want to understand how to protect your deductions, avoid audit headaches, and ensure your next cost segregation study is actually audit-ready.
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