A quality cost segregation study involves a detailed engineering analysis by reviewing all relevant information such as cost documentation, building blueprints, and purchase and/or lease agreements. There should also be an on-site inspection of the property done by a qualified professional, preferably an engineer or cost segregation specialist. Following the above steps, a detailed breakdown and costing of all building components is done which will properly allocate each to their appropriate recovery periods (primarily 5, 7, 15, 27.5/39-year). Soft costs or indirect costs such as architectural fees, engineering fees, insurances, permits and builder’s overhead and profit are then allocated in accordance with the findings of the study. Please note that a quality engineering-based study must address ALL depreciable costs, NOT just those qualifying for shorter recovery periods or Residual method (a definition of the Residual Estimation Approach can be found in the Cost Segregation Audit Techniques Guide – Chapter 3 – Cost Segregation Methodologies). The final step is to properly reconcile the engineering documentation to the total depreciable cost basis supplied by the CPA and /or client.