There is no such thing as a simple "formula" for a cost segregation study.
However, the purpose of the IRS Cost Segregation Audit Techniques Guide (ATG) is to provide guidance and steer IRS Auditors and taxpayers into the right direction of what would be considered a "quality" study and report. "Quality" to the eyes of the IRS, is a report and study that is efficient and expedited during audit.
The ATG highlights the top elements that encompass a quality study and report.
Summary of what a quality cost segregation study and report entails:
The study is prepared by a person(s) with knowledge of construction and tax law
The methodology used is described along with the steps taken to classify assets and determine costs
Proof of documents used to classify assets and determine costs
Consistency across the board with data and costs
Extensive legal analysis to support property classifications
Reconciling total allocated costs to total actual costs for accuracy
Reclassification of § 1245 Property and § 1250 Property
An executive summary and/or letter
Report describing the rationale of the study
Breakdown, exhibit, and methodology used for all costs
The takeaway here: if your cost segregation study includes the above elements, you can expect that your study will have an efficient and successful outcome if it is audited.
For more information on how Titan Echo leverages these elements in a study: