Revenue Procedure 11-14 permits taxpayers to conduct retroactive cost segregation studies. Originally issued in 1996 (Rev. Proc. 96-31), this revenue procedure allows taxpayers to make a change in depreciation method to recover missed depreciation deductions. Rev. Proc. 11-14, an automatic method change, is generally applied when taxpayers inaccurately classify assets as 39-year non-residential real property rather than 5-, 7- or 15-year personal property.
Depending on a taxpayer’s construction activity in prior years and its attention to accurately classifying property, a detailed retroactive cost segregation study can provide substantial cash savings.