The House Truth

The House Truth Field Notes

What to Document for a Single-Family Rental Cost Segregation Study

By Ben Vinson (Bennett Vinson)

For a single-family rental cost segregation study, give the CPA and study preparer a property record they can trace. Identify each documented item, record where it is and how much is there, and tie the measurement to dated photos and any available cost records.

Cost segregation field documentation checklist

  1. Identify the property and the walk. Record the property, walk date, walker, and areas covered. Keep acquisition and renovation records labeled by date and project.
  2. Record one item per line. Give it an ID, exact location, description, measured quantity, and unit. Note how you measured it and flag any area you could not access or verify.
  3. Attach dated field evidence. Take a wide photo for location and close-ups for relevant details. Use the same item ID on photos, measurement notes, and supporting documents.
  4. Link the cost record. Attach available invoices, receipts, or contracts. Identify the exact invoice line when you can. If the invoice bundles work, flag that for the study preparer and preserve the original document.
  5. Hand off the open items. List missing records, bundled costs, and quantities that need review. Keep those separate from verified measurements. The field packet provides evidence. Your CPA and study preparer handle classification, cost allocation, and tax treatment.

Example of one documented item

Illustrative example. Item LR-01 is living-room flooring. The room measures 12 by 15 feet, or 180 square feet of floor area. The packet includes a dated doorway photo, a close-up showing the material, and a measurement note. The contractor invoice bundles flooring and trim, so the packet references the invoice and flags the cost breakdown as open. The field record preserves the measured floor area and leaves the allocation for review.

Keep the records traceable

Use the same item IDs in your renovation scope and field evidence. For background on the study and its supporting documentation, see Chapter 4 of the IRS Cost Segregation Audit Technique Guide, which is written for examiners. See the Eyes On approach to field documentation.

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