HVAC system

[Corduroy Frog]

HVAC systems can be depreciated quicker than buildings and do not have to be spread out over 39 years.

Having said that, they are still to be considered a COMPONENT of a building. Do they qualify for s.179 treatment??

[ChEAr$]

HVAC systems can be depreciated quicker than buildings and do not have to be spread out over 39 years.

Having said that, they are still to be considered a COMPONENT of a building. Do they qualify for s.179 treatment??

Just what is the minimum useful life we may use?

[mastertaxguy]

HVAC systems can be depreciated quicker than buildings and do not have to be spread out over 39 years.

Having said that, they are still to be considered a COMPONENT of a building. Do they qualify for s.179 treatment??

Please help. What specific authority is there (which I must have missed) that makes HVAC systems subject to "quicker depreciation" than commercial buildings?

Thank you.

[Nashville]

Master of Masters

There may not even be a cite, but the practice is in widespread use for generations.
If no specific authority exists for an HVAC to be depreciated separate, then likewise no
specific authority exists forcing it to be part of the building.

A $300,000 building (commercial) gets drug through the garden at 39 years.

However, if this building consists of $200,000 in building construction, $50,000 of furniture,
$20,000 of machinery, $20,000 HVAC, and $10,000 in other personal property, then each of
these items could be depreciated separately with shorter lives.

I am probably not the best expert as to what must remain with the building, but mostly
common sense. One fairly good criteria is whether the components can be removed and
re-installed somewhere else. I think ALL personal (as opposed to "real") property could be
depreciated according to their respective useful lives.

[mastertaxguy]

HVAC depreciation

May want to take a look at Amerisouth Xxxii, Ltd, a March 12, 2012 tax court decision. TC Memo 2012-67. The decision deals with a number of depreciation claims for various "personal property" items part of an apartment complex, including land improvements prior to building, and HVAC systems and "special" HVAC systems. Your agressiveness in depreciation matters is admirable I suppose.

[Nashville]

Amazing Court Case

Your agressiveness in depreciation matters is admirable I suppose.

It's not admirable if it's not correct. But I do take the client's position on gray matters.

There is an ongoing post as we speak about component depreciation (from Bill Tubbs), so there may be a double benefit from the discussion. I would advise any interested parties to read Mastertaxguy's court case - it's the best one I've seen on component depreciation. My position has always been (as recent as Sunday Mar 24) to treat an HVAC unit is a separate piece of equipment, and the internal ductwork as part of the building.

Interestingly enough, the taxpayer in the court case, AmeriPrise Texas (or some such), tried to get away with murder on their classification, and for the most part deserved to lose. For one thing, they purchased an entire existing building rather than separating the components upon construction. They tried to allocate rapid depreciation to city property in the building by easement. They tried rapid depreciation on such things as electrical wiring and plumbing - even to the extent of plumbing fixtures and sinks.

Most of what they got dinged for would have failed the "common sense" criteria.