Illustrative Quality Assurance Review
Checks a draft study for missing photos, broken reconciliations, and classes that lack a cited authority — using the ATG’s quality elements as what examiners look for. Educational information, not tax advice.
Educational information, not tax advice.
Updated 2026-10-14
Assumptions
- Educational information, not tax advice.
- The audit guide’s quality elements are the checklist. The IRS has not established preparer qualifications or a standard report format (F-17).
- CostSeg SI describes a quality-assurance agent as a proposed Super Intelligence stage that flags exceptions. Sign-off remains professional. This website does not certify an unnamed engineer (F-17, F-18).
- QA does not create deductions. A missing land allocation or a Peco-style binding purchase schedule are upstream problems QA cannot fix.
Key takeaways
- Publication 5653 lists thirteen principal elements of a quality study and nine of a quality report. Those are examiner expectations, not an IRS approval stamp.
- Exceptions should be routed to a person. Changing a line or sending a study back is successful QA.
- QA does not create deductions and does not repair a written §1060 allocation that contradicts the draft split.
- Do not call the study IRS-approved or IRS-compliant. Do not claim operational QA or engineer-certification agents.
Before delivery, a reviewer asks: Is there an inspection? Do photos match the lines? Does the total equal basis? Does every short-life line cite a regulation, matrix row, or case? Are held or unverified legal theories absent?
CostSeg SI describes a quality-assurance agent as a proposed stage that flags those exceptions. Sign-off remains professional. The study is not certified by an unnamed engineer on this website.
Order of operations for QA is a gate, not a second classification theory. Walk the ATG elements. Fail closed on missing land, broken math, and unlabeled 5-year lines. Route judgment items — movable partitions, dedicated HVAC, activity class — to a person. Do not “fix” a Peco writing by ignoring it.
What QA cannot fix
A missing land allocation or a Peco-style binding purchase schedule. Those are upstream problems. If land was never valued, the depreciable total is unknown and reconciliation is theater. If a written §1060 allocation assigned the entire price to “building,” a later personal-property takeoff can be blocked. The ATG says the scope of Peco beyond §1060 acquisitions is unclear. QA’s job is to flag the writing, not to wish it away.
QA also cannot invent invoices that do not exist. It can require the cost-estimate approach to be described, sources cited, and rule-of-thumb percentages removed.
Thirteen study elements as a checklist
The ATG’s principal elements of a quality study, by heading, are: preparation by an individual with expertise and experience; detailed description of the methodology; use of appropriate documentation; interviews conducted with appropriate parties; use of a common nomenclature; use of a standard numbering system; explanation of the legal analysis; determination of unit costs and engineering take-off; organization of assets into lists or groups; reconciliation of total allocated costs to total actual costs; explanation of the treatment of indirect costs; identification and listing of §1245 property; and consideration of related aspects (§263A, change in accounting method, sampling techniques).
A draft that skips inspection, uses creative labels, and does not reconcile fails several of those elements at once. Examiners look for that pattern. The guide still says the IRS has not established requirements or standards for preparing studies, and that the guide cannot be cited as an official pronouncement of law.
Nine report elements
A quality report, in the same chapter, includes a summary letter, a narrative, a schedule of assets, a schedule of direct and indirect costs, a schedule of property units and costs, engineering procedures, a statement of assumptions and limiting conditions, a certification, and exhibits (cost sources, reconciliation, photographs). Assumptions should state the placed-in-service date, land value, inspection scope, and missing documents. If an assumption changes, classifications that relied on it may change too.
Certification in the ATG sense is a report section. It is not a claim that CostSeg SI has a named engineer on staff. That staffing fact is not confirmed. Do not imply otherwise (F-17).
Proposed workflow versus operational claims
Flag missing photos, unmatched lines, broken totals, and uncitable classes. Route exceptions to a person. Do not claim that a QA agent, extraction agent, or RSMeans integration is operational, faster, or more accurate. Those are product descriptions without verified performance figures (F-18).
Do not treat a clean QA log as proof the return is audit-proof. No study is guaranteed. Educational information, not tax advice.
Downstream filing
After QA, the CPA files Form 4562 for the current year and, if the study is a look-back, generally Form 3115 with a §481(a) adjustment. QA does not file those forms and does not elect bonus, §179, or §168(n). Manufacturing files that mention qualified production property should flag §168(n) as an election to discuss with a CPA, not as a study conclusion (F-03).
A study that passed QA with restroom accessories moved back to building has done its job even if the short-life total shrank. No reclass percentage is a success metric on this site (F-19). Examiners can re-measure a parking lot and re-read a matrix row. They cannot test a percentage pulled from another city or a schedule that does not add to basis. Those are the failures this checklist is built to catch before delivery.
Sources
- 1IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
- 2
- 3
- 4
- 5