Long time held Contractor Model Home depreciation

[TaxprepP]

There are only two recovery periods for real estate today. Residential rental property is 27.5 years. Nonresidential real property is 39 years.

The nonresidential description is misleading, because it can apply to residential real property that is not rented, such as an office in your home. Thus, it really boils down to whether the property is rented or not. If rented, its 27.5 years. If not, its 39 years.

The 31.5 year recovery period applied to MACRS nonresidential real property placed in service before May 13, 1993. There was also an alternate MACRS method for real property placed in service before 1999 which allowed for a 40 year recovery. The 40 year method was used to avoid AMT.

Thanks. I had racking my brain to figure this one out. It isn't exactly commercial, it is a residence but is not a residential rental.
The model home was placed in service 2007 and is not nor was ever rented. It is used as a demo to promote the company's construction servivces. So the 31.5 year and 40 year life will not apply. I will use the 39 year recovery period.

Thank you!!

[Bees Knees]

There are only two recovery periods for real estate today. Residential rental property is 27.5 years. Nonresidential real property is 39 years.

The nonresidential description is misleading, because it can apply to residential real property that is not rented, such as an office in your home. Thus, it really boils down to whether the property is rented or not. If rented, its 27.5 years. If not, its 39 years.

The 31.5 year recovery period applied to MACRS nonresidential real property placed in service before May 13, 1993. There was also an alternate MACRS method for real property placed in service before 1999 which allowed for a 40 year recovery. The 40 year method was used to avoid AMT.

[TaxprepP]

Could use some guidance. I have a client corporation that provides contraction service. They have a long time help model home. With the new regs, I feel the former tax preparer did not class the asset at the correct recovery period which was put at 31.5 years with a placed in service date of 1/1/2007. I know homes built with intent to sell are unallowed depreciation. This home is not intended to be sold is is the demo model used to sell the company’s service. Does anyone know what the correct recovery period should be?

Also a year later it was remodeled with improvements. What recovery period should be used? I presume same as recovery period as initial building.