How to Prepare Your Property for a Cost Seg Study

Required documents

Closing statement (HUD-1, ALTA, or settlement statement). Documents the purchase price, allocation, and closing date. Required for every study.

Appraisal if available. The appraiser's allocation between land and building is a useful starting point for the land/building split.

Prior depreciation schedules if the property was previously owned and depreciated. Required for look-back studies. Helpful for current-year studies to confirm prior treatment.

Highly recommended

Blueprints or property layout. Provide accurate measurements for component allocation. Most useful for commercial properties. Less critical for residential.

Photos of post-purchase improvements. Document any changes made between closing and the cost seg study. Important if improvements substantially changed the property's component mix.

List of personal property included in the sale. Furniture, appliances, fixtures included with the purchase. Affects the 5-year personal property allocation.

Optional but valuable

Construction cost records for self-built or substantially renovated property. The engineer uses these for Pub 5653 Chapter 3 Method 1 (detailed engineering approach from actual cost records).

Tenant lease agreements showing tenant-owned vs landlord-owned improvements. Affects component allocation between the property owner's basis and tenant improvements.

Property inspection prep

For virtual inspection (residential), prepare to walk the property with the engineer via video. Have good lighting, hold the camera steady, and follow the engineer's prompts to capture specific component views.

For in-person inspection (commercial), ensure the engineer has access to all areas including utility rooms, roof, parking, and tenant spaces (with tenant consent). Schedule for daytime to capture exterior components.