Sec 179 Write-Offs


The cost of a real property leasehold improvement generally
has to be depreciated over a 39 year recovery period. However, if expenditures
can be properly classified as tangible, personal, movable, non-real estate
property, they may qualify to be deducted currently. This can provide a
tremendous tax benefits.

The analysis used to
determine which costs can be classified as personal property rather than real
property is referred to as "component depreciation" analysis. The foundation
for this is based on the law that had applied years ago for the determination
of what property qualified for the investment tax credit under prior law Code
Section 48. Hospital Corp. of America & Subs. v. Comr
., 109 T.C. 21 (1997).  Structural components of a building don't qualify for more
rapid depreciation or Section 179 expensing. Structural components relate to
the operation and maintenance of a building. Treas. Reg. Sec. 1.48-1(e). These

permanent structures
and door locks. Treas. Reg. Sec. 1.48-1(e)(2); FSA 200203009
such as permanent tiling
ceilings. Metro Nat'l Corp. v. Comr
., 52 T.C.M. 1440 (1987)
air conditioning and heating systems
Basic affixed electrical wiring, wall outlets and
general lighting
General Lighting
General plumbing

Non-structural components
and personal property can qualify for more favorable tax benefits.  Structural components that don't relate
to the operation and maintenance of a building as a building may qualify. These
include 5 or 7 year recovery periods, rather than 39 years, and the potential
for immediate deduction under Section 179. These can include:

partitions. Rev. Rul. 75-178, 1975-1 C.B. 9
and machinery used to maintain temperature or humidity requirements (e.g., for
food preparation)
Removable air-conditioning
equipment. Scott Paper Co
74 T.C. 137
Computers and peripheral
equipment and wiring
Smart board and related wiring
and equipment
Special removable lighting
Removable kitchen equipment and furnishings
Telephone equipment and wiring, including wiring
related to intercom, dictation and call systems. Hospital Crop. Of America
v. Comr
Special electrical wiring and plumbing hook-ups
relating to particular equipment or function. This would include electrical
loads for particular items of business equipment
piping, plumbing connections, dishwashers, etc
that relate to the provision of services rather than building functions
Removable carpeting. Rev. Rul. 67-349
Vinyl wall covering
floor tiles, or other floor coverings that are not an integral part of the
floor itself
Removable ceiling treatments
Signs and ornamentation
and equipment
Removable shelving.

A number of factors can be
considered in determining whether property qualifies for the more favorable

Manner in which the property is attached to the
building. It should not be permanently attached
property is inherently moveable
Size, weight and
construction of the property
The type of
equipment and number of people required to move the property
 The property or similar property has been moved in
the past
Facts support that the property may not stay in
place permanently
The property was not designed to
stay in place permanently. L.L. Bean, Inc. v. Comr
., T.C. Memo 1997-175, aff'd 145 F.3d 53 (1st
Cir. 1998)

The cost, time and difficulty of
moving the property
Little damage will be done to
the property when moved
Little damage
will be done to the building when the property is removed
The property could readily be re-used if moved.

To secure your write-offs you need to
corroborate the allocation. You might use an engineering and cost analysis of
construction records, engineering and cost estimation (when actual records are
not available), survey of contractor data, or other estimates.

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